UK banks scrap dividends, buybacks after regulator push

02 Avril, 2020, 10:33 | Auteur: Auguste Feret
  • Barclays HSBC Lloyds Banking Group Royal Bank of Scotland Standard Chartered and the British arm of Spain's Santander have all halted dividends

In response, Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander and Standard Chartered all stated that they will scrap dividends and not pursue buybacks.

HSBC Holdings Plc plunged in Hong Kong trading after axing its dividend and warning revenue and loan losses will be impacted from the virus outbreak that has halted economic activity across large parts of the globe.

"While we do understand the social rationale behind these steps, this regulatory intervention risks leading to further underperformance by United Kingdom banks in the near-term, relative to both United Kingdom insurers and global banks", Citigroup analysts wrote in a note.

HSBC's shares slid 8.7% to HK$40.30 as of 11:52 Hong Kong, bringing this year's decline to 33.7%.

Some of the biggest banks in the United Kingdom have scrapped billions of pounds in shareholder dividends and share buybacks after the Bank of England (BoE) said holding onto cash would help lessen the financial fallout from the coronavirus pandemic.

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It comes after a request from the Bank of England's Prudential Regulation Authority (PRA) that they suspend all plans to return money to shareholders.

"It looks structurally bearish for the sector, namely: higher cost of equity, increased regulatory uncertainty, weaker investment cases in the event of future capital raises", Jefferies analyst Joseph Dickerson wrote in a note, adding that HSBC is likely most at risk. They also agreed to suspend any buybacks. Standard Chartered Plc tumbled 5.3%. Barclays was due to pay more than £1 billion on Friday.

Banks are under pressure globally from volatile markets and slumping growth, but have also been at the front-end of massive support from central banks and regulators, including relief on some capital buffers and more time to tackle soured loans. But it warned reported revenue for the three months to the end of March would suffer in insurance manufacturing and credit and funding valuation adjustments in global banking and markets alongside higher credit losses.

In a brief trading update HSBC said performance had been resilient in the first quarter of 2020 in hard economic conditions and credit quality had held up well so far.

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