If you've had your hand outstretched over the past couple of weeks, hoping that one or more of Canada's Big Banks would throw you a few extra pennies in the form of rising dividends, you're a disappointed shareholder right now.
National Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Montreal, Royal Bank of Canada and Toronto-Dominion Bank paraded big increases in their net earnings in their respective fiscal first quarters, most of them blowing past expectations.
But dividend increases were barely mentioned. Only Bank of Nova Scotia is left to report (on Tuesday), and it is hard to imagine the bank stepping out of line with its peers.
The reason for this tight-fisted approach to dividends, even as some banks are approaching their third year without a boost? Royal Bank's chief executive Gord Nixon said on Wednesday that it comes down to uncertainty over bank reform proposals made by the Basel Committee on Banking Supervision.
Those proposals are supposed prevent another financial catastrophe along the lines of the one that recently torpedoed the global economy. They address, among other things, the amount of capital that banks must hold, so that bad bets will no longer require taxpayer bailouts.
But a fog of uncertainty hangs over these proposals and some observers are concerned that a stricter regulatory framework could impede the global economic recovery. As a result, banks are sitting on their cash until they know more about what's heading their way.
Still, there is reason to feel optimistic that dividends will grow again, eventually. Mr. Nixon gave one hopeful sign in a response to an analyst's question following the release of Royal Bank's earnings on Wednesday (full disclosure: I own shares in CIBC and Royal Bank).
"From a macro perspective, we feel quite comfortable that our capital levels are sufficiently strong that, whatever the new rules and regulations are, we should be in very good shape, which shouldn't affect our ability to repatriate capital - whether it's share buybacks or dividend increases," Mr. Nixon said.
According to Jason Bilodeau, an analyst at TD Newcrest, the earliest you can expect a dividend hike is the fiscal first quarter of 2011 - 12 months from now. If he's right, that will mark three-and-a-half years without a dividend boost by Royal Bank, an eternity when you consider that dividends used to be raised every year, and sometimes more frequently.
But take heart: Just a year ago, some observers were contemplating the likelihood of dividend cuts by Canadian banks, in particular by the Bank of Montreal, whose dividend yield shot above 10 per cent as the share price sank. Today's contemplation of dividend increases shows how fast things can change.
David Berman