Lenders are under pressure to raise an additional 115 billion euros ($146 billion) of capital by June to meet European rules. They're finding it harder to generate that money from earnings, which are forecast to shrink 20 percent from 2010 levels, or raise it from investors in rights offerings. Bank stocks in the region have declined 36 percent in the past year.

"Shareholders and regulators do not currently see eye to eye as regulators are asking the banks to do recapitalizations at the worst time possible," said Christophe Nijdam, an analyst at Alphavalue in Paris. "The big question mark will be the economic slowdown. The more severe it is, the higher the cost of risk and the more constrained the dividend-payment capability."

All four publicly listed French lenders, five of Spain's nine banks and nine out of 14 in Italy will cut or omit their dividends when they announce annual earnings, the Bloomberg estimates show. In all, 53 lenders in 11 euro nations will pay a combined 9.24 euros a share in dividends, 41 percent less than the previous year and 28 percent less than distributed for 2009, the year after Lehman's bankruptcy, the data show.

Eoin Treacy's view Europe's banks are badly in need of capital and dividends are among the easier cuts to make among a range of rather unpalatable choices. This table of the members of the Dow Jones Euro Stoxx Banks Index suggests that some of the only banks with no 12-month dividend yield are from countries in receipt of bailout funds. The number of such banks looks set to increase.

A number of European banks omitted dividends in 2011 and appear likely to continue that policy in 2012. Natixis (11.68%), Credit Agricole (10.79%), Societe Generale (10.75%), Banca Popolare di Milano (10.7%) and Banco Espirito Santo (10.28%) all exhibit yields out of character with the financial condition of the respective companies.

One of the challenges facing the European banking sector is how exposed it is the health of the Eurozone's respective economies. Most banks spent the last decade expanding across the continent rather than targeting high growth economies in Asia and Latin America. In fact, the only bank in the Euro Stoxx Banks Index to derive more revenue from outside Europe than inside is BBVA.

This has not insulated the share from the travails of the sector. It fell by almost 80% during the financial crisis, rebounded well, but hit a medium-term peak in early 2010 and has held a progression of lower rally highs since. Prices have encountered resistance in the region of the 200-day MA on successive occasions over the last 2 years and a sustained move above €7 will be required to question this primary downtrend consistency characteristic. The share currently has a P/E of 7.3 and dividend yield of 4.5%.