Shareholders of Absa Group Ltd, a major South African bank, will not be receiving any dividends at the end of FY 2020. The company said it is trying to conserve cash in view of the devastating economic hardships caused by the Coronavirus pandemic.
In a statement to Bloomberg, the bank projected that its 2020 earnings before one-time items and accounting adjustments will most likely drop by as much as 40%, compared to what was recorded in 2019. And even though the bank has strong buffers and is expecting an “improved second-half capital generation”, it believes that not paying out any dividends in the meantime is the right way to handle the economic fallouts of the pandemic.
Absa Group’s decision not to pay 2020 dividends is quite a contrast to that of its major competitors ―FirstRand Ltd and Standard Chartered Group Ltd ―both of whom recently disclosed that they have enough cash to pay dividends to their shareholders.
Meanwhile, regulators in the country had earlier advised banks to consider halting dividend payouts to their shareholders in view of the pandemic. Much like it has been the case elsewhere, South Africa banks have been forced “to contend with the longest recession since 1992 and unemployment at a 17-year high after restrictions to curb the spread of COVID-19 hammered what was an already fragile economy. Absa’s headcount declined by 1,200 in the first nine months of the year.”