Italian Market and Investor Approach: patient on the short term, the market wants long-term returns

Large shareholders of Italian banking institutions embrace the ECB's recommendations to stop (or freeze) dividend payments, despite the fact that such payments represented an important source of liquidity and a significant return on the capital invested.

In an article published in Sole24Ore, Morrow Sodali Director Fabio Bianconi commented on the fact that this particular decision to reduce or freeze dividend payments could paradoxically be an opportunity for banks to strengthen their relationship with their shareholders, noting that this will  happen if banks can demonstrate that they “can make good use of the remaining capital, supporting the economy and being transparent on how they will use this cash.”

Relative to the current coronavirus-related crisis, he added that the timing of the outbreak, on the eve of the AGM season, could be used as an advantage by banking institutions as this is the period of the year when “the dialogue between banks and investors deepens, which gives the former more time to lay out what they intend to do.”

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