With Canadian banks sitting on a pile of surplus capital as they await new global banking rules this fall, one of the big guessing games is when they will move to increase their dividends.
Investors are understandably impatient, having gone through at least two years of no increases as the banks amassed capital, agreeing not to deploy it towards dividend hikes or share buybacks until they knew what new rules will say.
Toronto Dominion Bank chief Ed Clark waded into the discussion Thursday.
Without committing to anything, Mr. Clark said the freeing up of surplus capital in the year ahead is on everyone's mind, but there will be no rush.
"The question of how much capital gets liberated -- and when -- is certainly something that I think only a brave CEO would talk about. And I'm not that brave," he said.
Indeed, Mr. Clark and his fellow bank CEOs are walking an interesting line: they all want to appear eager to reward investors for sticking it out, but they don't want to get ahead of themselves and promise anything too soon.
"I think we don't want to get drawn into too detailed of a discussion of how the capital rules are going to get implicated because the point I was trying to make is, we're halfway through this process .... it's very complicated," Mr. Clark told analysts on TD's third-quarter conference call.
The actual amount of so-called Tier One capital the banks will need to carry to backstop their operations, and the definition of what counts towards that number, will not be known until November. Investors know the Canadian banks (such as TD, which has a Tier One capital ratio of 12.5 per cent) will be comfortably above whatever the new regulations require, they just don't know by how much.
"And the exact timing of what gets phased in when, and the calibration level of what they're trying to achieve haven't been agreed to," Mr. Clark said. "There are discussions going on, but they are still going on, so it's hard to be precise."
At best, Mr. Clark said it's an issue TD will be looking at in Q1 of next year.
"We would hope by the end of the first quarter that we would all know the capital rules and we would all know whether we have surplus capital or not... or how much buffer you have to have," he said.
Grant Robertson