On Sunday, rumors were rife in the market that bank dividends would be withheld on a directive from SAMA, the central bank, in lieu of the stimulus package that has been allocated to the lenders.
SAMA in March announced a 50 billion riyal stimulus package for banks for deferrals on loan installments for small and medium-sized businesses (SMEs). The package also provided 13.2 billion riyals to SMEs through bank loans and 6 billion riyals in loan guarantee programmes.
In early June, SAMA said it was set to inject another 50 billion riyals into the banking system to enhance liquidity in the sector.
SAMA has so far made no official announcements relating to bank dividend payouts. Banks are currently reporting their second quarter financials.
Saudi banks are expected to pay around 23.5 billion riyals in dividends for 2020, compared to 28.9 billion riyals last year.
“My assumption is Saudi banks are likely to pay a lower dividend this year compared to 2019. But this will be shaped by lower earnings as economic activity has been quieter due to the COVID-19 pandemic-induced lockdowns,” Shabbir Malik, banking analyst at EFG Hermes, told Zawya.
He, however, declined to speculate on H1 dividends payout being linked to SAMA’s stimulus program for banks.
Bank stocks were trading slightly lower on Tuesday on the Saudi Tadawul equity market.
Last month, the Kuwait Banking Association announced that its members would pay no cash dividends for 2020.
The decision was taken "to enable the banking sector to play the financial brokerage role, ensure liquidity flow and operations in various economic sectors,” a Kuwait Banking Association statement said.
On Tuesday, The European Central Bank extended a recommendation to eurozone banks not to pay dividends until the end of the year to help them cope with the economic fallout of the coronavirus pandemic, Reuters reported.
Dividends are a key source of income for the retail investor in Saudi Arabia, and high-dividend-yielding stocks generally tend to do well even in bearish markets.
(Reporting by Brinda Darasha, editing by Seban Scaria)
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