Top Romanian lender Banca Transilvania returns to free shares instead of cash dividends

Banca Transilvania (TLV), the biggest lender in Romania in terms of assets, will discontinue cash dividend payments and return to capitalizing its profits and distributing free shares to its shareholders, according to a report sent to the Bucharest Stock Exchange (BVB).

The bank plans to capitalize almost half of its 2020 net profit – RON 573 mln out of RON 1.2 bln – and distribute free shares to its shareholders.

The shareholders will thus receive one new share, free of charge, for every 10 shares held. The rest of the profit will be transferred to the bank’s reserves accounts.

Banca Transilvania thus discontinues the distribution of cash dividends after five years in which it compensated the shareholders with a combination of cash and stock dividends. The decision is in line with the central bank’s recommendations that local banks reduce the dividend payments to prepare for potential difficult situations caused by the COVID-19 crisis.

The other big lender listed on BVB, BRD-Groupe Societe Generale (BRD), also cut its dividends by 95% compared to last year to just RON 52 mln (EUR 10.6 mln). The gross dividend per share proposed by BRD is RON 0.0749 resulting in a dividend yield of under 0.5%.

Both Banca Transilvania and BRD recorded lower profits in 2020 compared to 2019, but 2021 could be even more challenging for the local banking system as the loan repayment moratoriums expire.

(Photo source: the company)