Potential difficulties for banks to distribute dividends

Potential difficulties for banks to distribute dividends or buy back more shares would be the latest in a series of problems facing investors. Since the financial crisis since 2008, which was partly caused by bad practices of banks in terms of lending and the assumption of debt, financial institutions were involved in large-scale trials and are challenged to support earnings. Historically low interest rates also depress profits, reminds Reuters.

Melting of dividends

Banks pay a much lower percentage of their profits than before. Between 1999 and 2006, large banks are generally channeled around three-quarters of their income dividends or redemptions, according to an analysis of Credit Suisse. In recent years, the share is below 50%.

Largely decrease in dividends is due to the fact that in 2009, regulators began to supervise their payment and harvested buyouts. The purpose of the Federal Reserve was to prevent a repetition of the events of 2007 and 2008, when banks paid more than they earn. For financial institutions, however, it is more difficult to cut dividend payments in hard times, because they fear that such a move would broadcast signal of weakness to investors and customers, which would further weaken their business.

At the same time investors remains unclear when that will change. "Banks are reluctant to start paying more and will do it - just do not know when," said Tony Scherer told Reuters analyst portfolio manager Smead Capital Management, which owns shares of Bank of America, Wells Fargo and JPMorgan Chase. Currently the largest banks expect the Fed's approval of dividend plans for 2015, and will learn the results in March, specifies agency.