EU bank dividend stars may fall back to earth

Royal Bank of Scotland
Spencer Platt | Getty Images
Royal Bank of Scotland

Investors shouldn't get starry-eyed about European lenders bearing dividends.

A return to distributions may be a message of confidence to shareholders starved of income following years of banks using profit to boost equity and gratify regulators. But market conditions may puncture this year's euphoria.

Exhibit A is Erste Group. The Austrian bank has vowed to pay out 22 percent of 2015 earnings after either paying no dividend or failing to fully cover it from earnings in three of the previous four years.