Pre-pandemic financial institutions were one of the largest contributors to dividend distributions in Europe (and globally). This reinforced the perspective that the sector's recovery following the global financial crisis was in its final stages. 2019 was a good year revenue-wise, including the bank sector, and dividend expectations were robust going into 2020. The Dec-20 expiry of the EURO STOXX® Banks Index Dividend Future closed at 5.46 on 20 January 2020 – and the underlying price index (SX7E) was at 94.85. This meant, in simple dividend yield terms, healthy expectations of around 5.75%. The ECB also maintained its guidance on distributions policies being prudent and subject to maintaining minimum capital requirements, so the levels of certainty around dividends were relatively high.

Moving forward to Autumn 2021, we now know with hindsight that, overall, the financial sector weathered the pandemic reasonably well, with some hiccups along the way, of course. In July, the ECB lifted the restriction on dividend payments and other forms of distributions from 30 September 2021 onwards, having introduced them early in the pandemic and extended such restrictions twice more. It was also the case that the financial sector wanted to remunerate shareholders as ongoing suspension of any payout potentially limited the ability to raise further capital when needed.

If you want to learn more about the EURO STOXX® Banks dividend index and to what extent the share buyback impacts the cash dividend payments join our upcoming webcast on 16 November.