BBVA, Spain's second-biggest bank, said on Friday it was cutting its 2013 dividend and capping payouts as of next year to a maximum of 40 percent of profits paid solely in cash.
The bank, which also reported an 86 percent rise in nine-month profit, is like other European banks bolstering its capital ahead of a Europe-wide asset quality review.
Spanish banks are recovering from areal estate crash and a deep economic crisis which ate into earnings in the last few years, with steep provisions against property deals last year gutting profits.
BBVA is the first lender to implement a major change in its dividend policy after the Bank of Spain said earlier this year that banks should cap dividend payouts in cash to no more than 25 percent of profits.
Most banks stood by their dividend policies throughout the crisis, which pushed up the amount of profits paid out to shareholders to well over 100 percent in some cases.
BBVA profits fell over 44 percent in 2012 and payouts as a percentage of profits reached 136 percent, paid in cash as well as in shares.
BBVA will cancel out a payment due in January and will slightly increase the last 2013 dividend payment due in April, but the changes will effectively spell a cut from a handout of 0.42 euros per share to 0.37 eurosfor the year.
"The Bank of Spain has issued a series of recommendations on dividends and we have to comply with them," a BBVA spokesman said.
The bank had been paying a 0.42 euros per share dividend since 2009, when its payout ratio had been around 37.4 percent, according to Reuters calculations based on BBVA figures.
That payout ratio leapt to 68.5 percent in 2011 and later to 136 percent as the crisis bit. The bank said on Thursday it was aiming to hand out between 35 percent and 40 percent of profits to shareholders annually.The change will be phased in as of next year.
BBVA's 2013 nine-month profit jumped to 3.1 billion euros, nearly double what it made in the same period a year ago but belowanalysts' expectations.
Like other Spanish lenders, BBVA has set less money aside to counter soured debts than in 2012, and a series of Latin American disposals earlier this year have also helped profits.
Nine-month net interest income fell 3.2 percent from a year ago to 10.85 billion euros, in line with forecasts.