* Dividends on hold for past two years
* Banks holding capital as they wait for new regulations
* TD, National, Laurentian may be likely to raise payouts
TORONTO, July 22 (Reuters) - Canadian banks could start raising dividends later this year, once lenders get a sense of new capital requirements due to be unveiled in November, RBC Capital Markets said on Thursday.
The brokerage, a division of Royal Bank of Canada (RY.TO), the country’s largest lender, also said in a note that U.S. financial reforms passed last week are unlikely to have a significant impact on the U.S. operations of Canadian banks.
Canada’s big banks stopped raising dividends in late 2007 and early 2008 as the credit crisis took hold and bank stocks began to tumble.
Most of the stocks have regained most or all of the lost ground, but the banks are choosing to hold higher capital levels amid uncertainty over proposed changes to capital and leverage requirements.
The Basel Committee on Banking Supervision is expected to deliver a complete package of reforms in November.
“We do not expect dividend increases until late 2010 at the earliest, but we believe that when the banks have more clarity on the new rules, a few of the Canadian banks might be in a position to increase their dividends,” analyst Andre-Philippe Hardy said in a note.
He said Toronto-Dominion Bank (TD.TO), the country’s second-biggest bank, as well as smaller lenders National Bank of Canada (NA.TO) and Laurentian Bank (LB.TO) were the mostly likely candidates to raise their payouts.
Canada’s banks have traditionally followed a conservative lending route, and managed to escape the financial crisis without government bailouts, unlike banks in the United States and Europe.
The new capital and liquidity rules will undoubtedly hurt profits in the sector, Hardy said, despite the high capital ratios currently held by the banks.
However, the massive U.S. “Dodd-Frank” financial reform bill passed last week will likely not have a big impact on Canadian banks that operate in the United States, he said.
The bill, designed to prevent another financial meltdown, will put new limits on derivatives activity and proprietary trading, among other measures.
Hardy said the bill “will have a material impact on many U.S. banks, but much less so for Canadian banks”.
Toronto-Dominion has a large retail presence on the U.S. Eastern Seaboard, as well as a 45 percent stake in online brokerage TD Ameritrade Holding Corp (AMTD.O).
Royal has a large retail bank in the U.S. Southeast, while Bank of Montreal (BMO.TO) operates in the Chicago area through its Harris Bank unit. (Reporting by Cameron French; editing by Peter Galloway)