Deutsche Bank won’t pay dividends for two years
German-based Deutsche Bank (DB) cut dividend payments for 2015 and 2016 as part of its plans to strengthen its capital. The bank also mentioned that it would continue to pay dividends from 2017 onwards at a “competitive payout ratio.” Since its establishment in 1952, Deutsche Bank has been paying dividends regularly. Since 2009, Deutsche Bank has been consistently paying annual dividends of 0.75 euros per share.
Rationale for the dividend cut
Deutsche Bank outlined company-wide financial targets aimed at cost cutting, reducing debt, and lowering the assets exposed to potential losses. Deutsche Bank’s cost-to-income ratio rose to 180%. It’s partly due to the exceptional loss, but costs are generally high compared to competitors—even in divisions that weren’t impacted by the loss.
Deutsche Bank’s CEO, John Cryan, has been under tremendous pressure to cut expenses, strengthen capital, and drive shareholders’ value. European banks (EUFN) like UBS, Credit Suisse (CS), and Royal Bank of Scotland (RBS) have been grappling with high costs and tougher regulatory requirements in the wake of the sovereign debt crisis.
Currently, Deutsche Bank’s shares are trading at distressed valuations. The bank’s shares are trading at the steepest discount to its book value.
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