Bank Hapoalim, Israel's biggest bank, said it will reinstate a cash dividend on a regular quarterly basis for the first time since the global financial crisis in 2008.
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The bank will pay on August 5 a quarterly dividend of 92.2 million shekels ($25.5 million), or 0.07 shekel a share, equal to 15 percent of net profit having been given the go-ahead from the banking regulator. It plans to maintain this level for the coming quarters.
Hapoalim last distributed a dividend in July 2011, but that was a special one-off payment.
The company's shares rose 2.5 percent to 17.06 shekels in early trade.
The bank said its board had decided on a policy of distributing up to 30 percent of its net operating profit. This policy will be in effect until the bank reaches the capital targets set by the banking regulator.
In the past year Hapoalim's core Tier 1 capital ratio to risk-weighted assets rose by 100 basis points to 9.1 percent, under Basel II directives, at the end of the first quarter. This is equivalent to 8.7 percent under Basel III, close to the level set by the banking regulator.
The country's central bank has called on banks to hold core capital equivalent to at least 9 percent of risk-weighted assets by the end of 2014 as part of a global drive to strengthen the industry and prevent a repeat of the 2008 financial crisis.
The Bank of Israel also wants the country's two top banks - Hapoalim and Leumi - to reach a core Tier I capital ratio of 10 percent by the beginning of 2017.
Once Hapoalim reaches this target it can return to its former policy of distributing up to 50 percent of profit as a dividend.