Banking watchdog says vulnerabilities still elevated, but keeps stability buffer at 1%
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That expectation hasn’t changed, effectively banning banks from hiking their dividend payouts or from repurchasing their own stock. It also remains the case as Canada’s biggest banks have been seeing their capital levels climb, pushed higher by their own profits, among other things.
“Capital positions mainly benefited from better earnings, less credit migration, and slower loan growth,” Canaccord Genuity analyst Scott Chan wrote in a Dec. 8 note to clients.
The increased capital is stoking curiosity about what the banks are going to do with the money, and about when OSFI could end the ban on buybacks and dividend increases.
National Bank Financial analyst Gabriel Dechaine wrote in a note to clients on Sunday that the average common equity tier 1 ratio for the Big Six banks, a measure of their capital strength, was 12.2 per cent for the quarter ended Oct. 31, the highest on record for the lenders.
“We do not believe OSFI will eliminate restrictions on buybacks and dividend increases until mid-2021, at the earliest,” Dechaine wrote. “However, we believe acquisitions are still possible.”
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