Real estate lender Aareal Bank has announced it is withholding its dividend payment to shareholders upon the advice of the European Central Bank (ECB).
Amid the coronavirus crisis, the ECB has cautioned companies to withhold profits meant for shareholders, in order to build up Covid-19 war chests for absorbing losses incurred by the virus and widespread lockdown measures, which have ground economic activity to almost a halt in Europe.
The advice recommends suspending dividends until October at the earliest. German bank Aareal said it carried out a ‘detailed review’ before deciding to follow the guidance and that it could extend the moratorium on dividends depending upon circumstances later.
Announcing the decision, Aareal CEO Hermann Merkens said: ‘Our resolution adopted today complies with the corresponding recommendation by the ECB, which we will take into consideration in our proposal to the annual general meeting for the appropriation of profits.
'Nonetheless, given the ECB’s recommendation and recognising the significant uncertainty associated with the Covid-19 pandemic, we consider postponing the final dividend decision to be appropriate. We will carefully monitor further developments, and will re-assess the situation in due course, also taking our shareholders’ interests into consideration.’
