The whole point of cutting dividends is to ensure that more net profit accretes to the banks’ Common Equity Tier 1 (CET1) and help support the banks’ total Capital Adequacy Ratios (CAR) so lenders can support businesses and the community.
The capital a bank holds is one of the metrics most closely watched by investors, ratings agencies and regulators in times of crisis like the Covid-19 pandemic.
Given the uncertain economic climate, the Monetary Authority of Singapore (MAS) has called on all locally-incorporated banks headquartered in Singapore to cap the total dividend per share for FY2020 at 60% of that of the prior year, and to offer shareholders the scrip dividend option.
