Ukraine’s central bank asks banks to postpone dividend payments

KIEV, April 3 (Reuters) – Ukraine’s central bank issued a recommendation on Friday for lenders to postpone dividend payments until October at the earliest and use their profit to boost capital to prepare for an economic downturn due to the coronavirus outbreak.

“Now an unfavourable macroeconomic scenario is developing in real life,” it said in a statement.

“The central bank considers that over the next six months, banks should maintain a substantial supply of capital to absorb possible losses.”

Ukraine’s government sharply revised its economic outlook on Friday, expecting the economy to shrink by 4.8% in 2020 due to restrictions imposed in the country and around the world to prevent the spread of coronavirus.

Last year Ukraine’s gross domestic product grew 3.2%, and the banking sector increased its net profit to 60 billion hryvnias ($2.2 billion) from 22 billion in 2018 when economic growth reached 3.4%.

“Financial institutions must maintain a capital reserve to support lending,” the central bank said.

Early last month the Ukrainian authorities banned or restricted many business activities except critically important services such as food production and sales, pharmacies, hospitals and police, to contain the spread of the coronavirus.

On Friday, a few weeks before Easter festivities when Ukrainians would usually congregate at church ceremonies, the government announced even tougher restrictions.

The central bank said businesses would need more working capital during the quarantine period and later when they resume their activities.

There are 75 active banks in Ukraine, including subsidiaries of European banks including Raiffeisen International, OTP, BNP Paribas and Credit Agricole . (Reporting by Natalia Zinets; editing by Matthias Williams and David Evans)