European banks plan to pay out about €70 billion ($77 billion) after a lucrative year, according to their top regulator, Report informs via Bloomberg.
“Banks have been particularly profitable, they’re planning distributions which are in line with previous years,” Andrea Enria, who leads the European Central Bank‘s oversight arm, said in an interview with Bloomberg TV. The figure is “tentative” and “very preliminary,” he added.
The ability to reward investors is crucial for an industry that’s been beset with low valuations for a long time. After a rapid rise in interest rates boosted net interest income, shareholders are expecting higher returns.
The payouts are still just a fraction of the excess capital in the bank industry. Ten major lenders have over €140 billion more than what they need for regulatory purposes, Bloomberg reported last week.
The ECB examines whether payouts “are compatible with the trajectories of capital for the banks and if so, we have no objection to that,” Enria said.
European regulators’ caution was on display earlier the day, when the ECB said banks’ key capital requirement will rise to 11.1% next year from 10.7% in 2023.
Read more: ECB Says Banks’ Capital Requirements to Rise Slightly Next Year
While lenders’ capital buffers meant they were resilient to various shocks this year, the industry has to keep an eye on risks including fallout from higher borrowing costs, Enria said.
“We need to remain very alert,” Enria said. “Credit risk is still an area of concern, especially real estate, commercial real estate, so the segments which are more sensitive to interest rates.”
