According to an official statement from management board of PKO BP, a dividend of PLN 0.8 per share (vs. PLN 1 per share in 2005), will be voted by shareholders at the AGM to be held on April 18. That equals to the dividend yield of 2.3% and payout ratio of 45.5% (vs. 66.2% in 2005). Considering last year, PKO BP presented in its strategy a policy of a 20-40% payout ratio. Management recently appears to be guiding market expectations towards a 40% payout ratio (from previous year's earnings) in 2006.
Nonetheless, given the bank's high solvency ratio of 16.93%, we were forecasting the bank to pay PLN 1.17 per share (equating to a 67% payout ratio). We believe a high dividend payout is sustainable in the medium term and would expect a negative trading impact if its cut this year. The foreign expansion plans of the bank are not viewed favourably, given limited synergy, implementation risk, and the possibility the bank could overpay for assets.