Bank Hapoalim (LSE: BKHD; TASE: POLI) will not be able to distribute a dividend until 2012, after making a loss in 2008. Yesterday, Hapoalim announced that "after we reach capital adequacy of 12% the bank intends to return to the cash dividend policy of 50% of profit on ordinary activity." This is meant to happen by the end of 2009, so that the bank believes that it will be able to distribute a dividend at the start of 2010.
However, Bank of Israel rules on dividend distributions state that a bank shall not distribute a dividend when "one or more of the three previous calendar years ended in a loss." The bank must also "draw up in writing a forecast showing that in the year following the dividend distribution, its capital adequacy will not fall below the required level."
Yesterday, Hapoalim announced that it expected to report a loss of some NIS 750 million for 2008. This means that it will not be able to distribute a dividend in 2009, 2010, or 2011. The bank's main shareholder is Shari Arison.
The Bank of Israel rules do provide that a dividend may be distributed if the Supervisor of Banks grants approval in advance. Bank Hapoalim said in response, "As we reported, we will return to a dividend distribution policy after we reach a capital adequacy ratio of 12%. We do not foresee any obstacle to distributing a dividend." This presumably means that the bank is sure that it will have no problem obtaining approval from the Supervisor of Banks.
Supervisor of Banks Rony Hizkiyahu has made it clear that the banks will not be able to distribute dividends in 2009. "Anyone who wants to make a distribution will have to come to me and explain why," Hizikiyahu said at the "Globes" Israel Business Conference two months ago.
Published by Globes [online], Israel business news - www.globes.co.il - on February 4, 2009
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