OTP Bank will pay shareholders 10.6 billion rubles. dividends
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The Russian OTP Bank plans to spend almost all of its profits in the first half of the year under IFRS on dividends in favor of the parent group from Hungary (part of the EU). To do this, the bank obtained permission from the Bank of Russia. This is the first such case in recent times: now dividend payments by Russian banks to shareholders from unfriendly jurisdictions are subject to special regulation. Lawyers point out that the terms of the permit may require partial storage of funds in Russia, in a type C account.
OTP Bank, part of the Hungarian banking group of the same name, plans to pay dividends in the amount of 10.6 billion rubles. From the reporting of the OTP group it is known that the profit of the Russian bank in the first half of the year amounted to 11.8 billion rubles. Moreover, in the second quarter, profit doubled: 7.9 billion rubles. versus RUB 3.9 billion In the first. The OTP headquarters told Kommersant that they had received approval from the Russian regulator. “This payment reflects 17 years of effective operation of the bank, which to date has led to the formation of significant financial surpluses. These dividends are paid with the approval of the Central Bank,” they indicated.
As noted in the information disclosure, in the case of payment of dividends in euros, the conversion rate is applied – the Moscow Exchange fixing the euro/ruble pair on the date of receipt of the list of persons entitled to receive dividends.
For the largest banks with foreign capital, such a decision to pay dividends is out of the typical picture.
In particular, Raiffeisenbank decided not to pay dividends for 2022; the bank’s dividends for the first half of 2023 were not reported. Unicredit Bank did not disclose information about dividends.
Hungary, as a member of the European Union, is considered an unfriendly jurisdiction to the Russian Federation. Payments of dividends to non-residents from unfriendly jurisdictions are currently subject to special legal regulation. At the same time, according to data on the OTP Bank website, the shareholder structure is distributed as follows: 66.2% belongs to OTP Bank Plc (Hungary) and 31.7% to the Russian Alliance Reserve LLC, 100% owned by the Hungarian bank .
As Vasily Konkov, a partner at the Sudohod law firm, notes, “if foreign shareholders want to distribute dividends of more than 10 million rubles, they are faced with a choice – either obtain permission from the government commission to withdraw such dividends abroad, or transfer them to type C accounts, which can hardly be called an alternative, since it will not be possible to get any benefit from this money.” The decision by the Hungarian group to pay dividends may have been made in the context of confidence in the positive decision of the government commission to allow them to do so, he admits.
Elvira Nabiullinahead of the Bank of Russia, at a press conference on March 17, 2023:
“We support this proposal to liberalize the payment of dividends received on investments made after March last year.”
Since the parent group has secured permission from the Central Bank, it is possible that “political bargaining” is taking place, admits Oleg Bychkov, a partner at Prospekt AB. However, whether this gives the regulator permission to withdraw profits outside the Russian Federation is unclear. The lawyer notes that this greatly depends on the text of the permit. Authorization for payment may be formulated with certain conditions, he does not rule out how and where the funds can go next. It is quite possible that they may allow part to be distributed to a type C account, and part to be paid directly.
In the case of paying dividends to a Russian shareholder with a foreign beneficiary, there are no restrictions yet, notes Mr. Bychkov. At the same time, questions remain regarding the further movement of funds. “If this money is sent further, if dividend payments are already made to an LLC, then there will be a question of coordinating such payments to unfriendly non-residents,” the expert notes. However, he recalls that earlier a government commission softened the conditions for agreeing on dividend payments in the amount of investments made by unfriendly non-residents in Russian businesses.
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