NBD will adopt the “Hybrid Dividend Policy” approach to determining dividends. This is a combination between the residual and stable dividend policy. Using this approach, NBD will view its debt/equity ratio as a long-term rather than a short-term goal. As the bank will generally experience business cycle fluctuations, it will generally have one set dividend, which is set as a relatively small portion of yearly income and can be easily maintained. On top of this set dividend, the bank will offer another extra dividend paid only when income exceeds general obtained levels.

Any payments of cash dividends will be at the discretion of the Board of Directors and the amount of such cash dividends may vary from period to period. The Board will take into account such matters as general business conditions, the Bank’s financial results, capital requirements, contractual restrictions, and other factors it may deem to be relevant and in the best interest of NBD’s shareholders. The Board also has the discretion of paying stock and or bonus shares as dividends only or in any combination with cash dividends.

The introduction of the new International Financial Reporting Standards (IFRS) is expected to increase the volatility in net profit. Therefore, NBD will pay out dividends in relation to the longer-term underlying development of profit.

Dividends will be paid out under the following conditions where:
ri = (risk adjusted) return investors can earn with dividend.
rc = (risk adjusted) return corporations can earn with dividend.
Ti = individuals tax rate
Tc = Corporations tax rate

General Rule for Dividend Payment:

                    > pay dividends
(1 - Ti)(ri)      = (1 - Tc )(rc)
                    < retain earnings