Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Anonymous,johnhemming,Anonymous,Rhyd6,dredd0, for Donating to support the site

Banks suspend Dividends

bruncher
Lemon Slice
Posts: 369
Joined: November 4th, 2016, 12:20 pm
Has thanked: 54 times
Been thanked: 22 times

Banks suspend Dividends

#296354

Postby bruncher » April 1st, 2020, 5:40 am

UK lenders have agreed to suspend dividends after pressure from the Prudential Regulation Authority - FT, Telegraph, Guardian, BBC etc have the story. Reminiscent of 2008.

Dod101
Lemon Half
Posts: 5807
Joined: October 10th, 2017, 11:33 am
Has thanked: 1319 times
Been thanked: 2331 times

Re: Banks suspend Dividends

#296359

Postby Dod101 » April 1st, 2020, 6:52 am

bruncher wrote:UK lenders have agreed to suspend dividends after pressure from the Prudential Regulation Authority - FT, Telegraph, Guardian, BBC etc have the story. Reminiscent of 2008.

No It is much worse than 2008. Not only is there no final dividend but dividends are suspended for 2020 as well irrespective of the results. That is we will not see a dividend until the summer of 2021. And they did not agree, they were bullied, almost blackmailed by the PRA.

Dod

88V8
Lemon Slice
Posts: 984
Joined: November 4th, 2016, 11:22 am
Has thanked: 127 times
Been thanked: 272 times

Re: Banks suspend Dividends

#296416

Postby 88V8 » April 1st, 2020, 9:46 am

Fortunately I have few bank ords.
But a lot of Prefs.
The Lloyds RNS refers specifically to ords. There is no RNS for the Prefs, so I guess/hope they're OK.
Ditto Standard Chartered.

Just received the divi for my STAC, and AV.B yesterday.

LLPD on offer at 1.2 (8.1%) so bought a few more.
STAC at 1.09 (7.6%) topped them up as well.
SAN at 1.3 (8%) ditto.

SANB 'only' yielding 7.5%, not so interesting, and NWBD even less.

Anyway, some silver linings from this little cloud.

V8

Wizard
Lemon Quarter
Posts: 4702
Joined: November 7th, 2016, 8:22 am
Been thanked: 799 times

Re: Banks suspend Dividends

#296438

Postby Wizard » April 1st, 2020, 10:40 am

88V8 wrote:Fortunately I have few bank ords.
But a lot of Prefs.
The Lloyds RNS refers specifically to ords. There is no RNS for the Prefs, so I guess/hope they're OK.
Ditto Standard Chartered.

Just received the divi for my STAC, and AV.B yesterday.

LLPD on offer at 1.2 (8.1%) so bought a few more.
STAC at 1.09 (7.6%) topped them up as well.
SAN at 1.3 (8%) ditto.

SANB 'only' yielding 7.5%, not so interesting, and NWBD even less.

Anyway, some silver linings from this little cloud.

V8


I'm not convinced. The announcements said no dividends and no buy backs of ordinary shares.

flyer61
Lemon Slice
Posts: 373
Joined: November 11th, 2016, 12:53 pm
Has thanked: 89 times
Been thanked: 113 times

Re: Banks suspend Dividends

#296460

Postby flyer61 » April 1st, 2020, 11:26 am

Dod 101.....it is much worst than even you think and I know you think it is bad! I expect the Government to purloin the money from the banks in due course. They know where it is and will take it under any pretext you care to imagine. Everything about our society is being squeezed by the state I feel it is going to end badly.

Terry Smith said banks were uninvestable and he is right. I won't be buying another UK bank share. You may as well call them HMB Lloyds, HMB Barclays, HMB Standard Chartered.....

dealtn
Lemon Quarter
Posts: 1397
Joined: November 21st, 2016, 4:26 pm
Has thanked: 33 times
Been thanked: 479 times

Re: Banks suspend Dividends

#296472

Postby dealtn » April 1st, 2020, 11:44 am

bruncher wrote:UK lenders have agreed to suspend dividends after pressure from the Prudential Regulation Authority - FT, Telegraph, Guardian, BBC etc have the story. Reminiscent of 2008.


Seems sensible and not totally unexpected.

hiriskpaul
Lemon Quarter
Posts: 1942
Joined: November 4th, 2016, 1:04 pm
Has thanked: 93 times
Been thanked: 456 times

Re: Banks suspend Dividends

#296668

Postby hiriskpaul » April 1st, 2020, 6:38 pm

dealtn wrote:
bruncher wrote:UK lenders have agreed to suspend dividends after pressure from the Prudential Regulation Authority - FT, Telegraph, Guardian, BBC etc have the story. Reminiscent of 2008.


Seems sensible and not totally unexpected.

Yes, completely justifiable IMHO, thank goodness the PRA are ahead of the curve for once. The last thing we want right now is for this to lead to a banking crisis. Dividend suspension is also consistent with government and BoE policy to try to keep UK companies afloat. Saying no bonuses across the board is sensible to. The banks can say "Sorry, not our fault".

It will be interesting to see what happens to prefs. In the grand scheme of things, the pref dividends are immaterial and may be too much trouble to interfere with. As we know, in the GFC LLPC and other Lloyds prefs were forced to stop paying for a couple of years, but others such as NWBD, STAC/STAB, SAN, etc. carried on, mainly due to the specific prospectus clauses that made suspension of dividends difficult or counterproductive - e.g. having to issue more prefs in compensation. I have noted that all the RNS refer to dividends on ordinary shares.

We still have significant position in LLPC and NWBD, with much smaller positions in STAB/STAC and ELLA. I had planned on selling more Lloyds prefs this coming financial year, but perhaps I should be thinking of buying again!

Lloyds have been buying back debt recently. I wonder whether the PRA will stop approval for this as well. If so, step-up issues coming due might be worth a look.

hiriskpaul
Lemon Quarter
Posts: 1942
Joined: November 4th, 2016, 1:04 pm
Has thanked: 93 times
Been thanked: 456 times

Re: Banks suspend Dividends

#296670

Postby hiriskpaul » April 1st, 2020, 6:46 pm

flyer61 wrote:Dod 101.....it is much worst than even you think and I know you think it is bad! I expect the Government to purloin the money from the banks in due course. They know where it is and will take it under any pretext you care to imagine. Everything about our society is being squeezed by the state I feel it is going to end badly.

Terry Smith said banks were uninvestable and he is right. I won't be buying another UK bank share. You may as well call them HMB Lloyds, HMB Barclays, HMB Standard Chartered.....

I think you may be getting a little too carried away with the gloom here! The banks are likely to be in enough trouble as it is. Current measures are being put in place to try to avoid their difficulties becoming calamitous and I welcome them. Even so, my preference would still be to avoid the ords and pick up their prefs and debt ;)

hiriskpaul
Lemon Quarter
Posts: 1942
Joined: November 4th, 2016, 1:04 pm
Has thanked: 93 times
Been thanked: 456 times

Re: Banks suspend Dividends

#296680

Postby hiriskpaul » April 1st, 2020, 7:13 pm

I have noted a lot of vitriol being directed towards the PRA over this, but I really don't see why some shareholders are so up in arms about the suspension of divis/buybacks. Unlike discretionary payments on prefs, or other capital instruments, unpaid dividends on the ords go into reserves and those reserves BELONG TO SHAREHOLDERS. On some of the comments I have seen it is as though the PRA, BoE or government have actually confiscated the dividends!

johnhemming
Lemon Quarter
Posts: 2773
Joined: November 8th, 2016, 7:13 pm
Has thanked: 6 times
Been thanked: 300 times

Re: Banks suspend Dividends

#296691

Postby johnhemming » April 1st, 2020, 7:26 pm

I suppose it is a cash flow issue for some people. In the medium to long term it makes no difference. Personally I like the idea of an investment in a relatively stable (nothing is that stable at the moment) company that generates funds paid in dividends. Actually from a tax perspective as long as you hold enough of the stock that minimum commissions are not an issue then buy backs are better (depending upon timing).

It looks like STB are not being required to stop paying dividends.

dealtn
Lemon Quarter
Posts: 1397
Joined: November 21st, 2016, 4:26 pm
Has thanked: 33 times
Been thanked: 479 times

Re: Banks suspend Dividends

#296694

Postby dealtn » April 1st, 2020, 7:33 pm

johnhemming wrote:I suppose it is a cash flow issue for some people.


It doesn't need to be. They can sell an equivalent portion of bank shares, and restore the position, as I have explained elsewhere. (Albeit that involves some frictional cost). But for many investors this is new territory. Many investors wouldn't understand a Rights Issue, or a share consolidation, so all they "see" is a dividend cancellation, and interpret this is a loss of income, when it needn't be.

Arborbridge
Lemon Quarter
Posts: 4815
Joined: November 4th, 2016, 9:33 am
Has thanked: 1058 times
Been thanked: 1693 times

Re: Banks suspend Dividends

#296698

Postby Arborbridge » April 1st, 2020, 7:41 pm

bruncher wrote:UK lenders have agreed to suspend dividends after pressure from the Prudential Regulation Authority - FT, Telegraph, Guardian, BBC etc have the story. Reminiscent of 2008.


No, not at all. HSBC carried on paying dividends throughout, and it is perfectly capable of doing so now. They have been mugged.

Unfortunately the mugging won't necessarily help the economy. Remember the stories coming out of the credit crunch in which the banks failed to help small businesses, or even (in the case of RBS) actively encourage there downfall? It'll be just the same this time because they will lay down conditions which no small businessman could live with.

Arb.

Arborbridge
Lemon Quarter
Posts: 4815
Joined: November 4th, 2016, 9:33 am
Has thanked: 1058 times
Been thanked: 1693 times

Re: Banks suspend Dividends

#296702

Postby Arborbridge » April 1st, 2020, 7:44 pm

hiriskpaul wrote: Unlike discretionary payments on prefs, or other capital instruments, unpaid dividends on the ords go into reserves and those reserves BELONG TO SHAREHOLDERS.


Yeah, right. :roll: Try paying your way with that then, in the local supermarket. If they belong to me, I elect to have them paid out, thanks.

No? Thought not, so a fat lot of good they are then - in effect they've been put beyond my usefulness in exchange for (to use a pyad expression) diddly-squat.

Arb.

dealtn
Lemon Quarter
Posts: 1397
Joined: November 21st, 2016, 4:26 pm
Has thanked: 33 times
Been thanked: 479 times

Re: Banks suspend Dividends

#296706

Postby dealtn » April 1st, 2020, 7:46 pm

Arborbridge wrote:

Unfortunately the mugging won't necessarily help the economy. Remember the stories coming out of the credit crunch in which the banks failed to help small businesses, or even (in the case of RBS) actively encourage there downfall? It'll be just the same this time because they will lay down conditions which no small businessman could live with.

Arb.


Like it, or not, the Banks are businesses, not charities. And that is why it is proving to be so difficult to steer through the mechanism for support at both micro and macro levels. Much of the reason for share price falls in Banks today is because of this. They are likely to have to get involved in support, that is uncertain, and likely costly, and subject to political control. The suspension of dividends in themselves are nothing to do with the share price reaction.

johnhemming
Lemon Quarter
Posts: 2773
Joined: November 8th, 2016, 7:13 pm
Has thanked: 6 times
Been thanked: 300 times

Re: Banks suspend Dividends

#296707

Postby johnhemming » April 1st, 2020, 7:48 pm

dealtn wrote:The suspension of dividends in themselves are nothing to do with the share price reaction.

I would think otherwise.

richfool
Lemon Quarter
Posts: 2214
Joined: November 19th, 2016, 2:02 pm
Has thanked: 466 times
Been thanked: 444 times

Re: Banks suspend Dividends

#296708

Postby richfool » April 1st, 2020, 7:49 pm

Is the situation with the banks going to lead next to the insurers? LGEN fell quite a bit today.

ADrunkenMarcus
Lemon Slice
Posts: 828
Joined: November 5th, 2016, 11:16 am
Has thanked: 260 times
Been thanked: 217 times

Re: Banks suspend Dividends

#296725

Postby ADrunkenMarcus » April 1st, 2020, 8:23 pm

I sold Barclays in January 2018, at which time the share price was 201p - down from 242p in October 1998! In hindsight, that was a great sale even if it seemed a depressed price at the time.

I still hold Standard Chartered, whose share price is now 414p - that compares to 504p in October 1998! Since it suspended its dividend in 2015 and reduced it, even with the recent cut it doesn't make too much of a dent in my income - however, from the point of view of share buybacks, the time to buy back shares is when the price is low. Clearly, that won't be happening now as they are not buying back shares.

Best wishes

Mark.

hiriskpaul
Lemon Quarter
Posts: 1942
Joined: November 4th, 2016, 1:04 pm
Has thanked: 93 times
Been thanked: 456 times

Re: Banks suspend Dividends

#296770

Postby hiriskpaul » April 1st, 2020, 11:04 pm

johnhemming wrote:
dealtn wrote:The suspension of dividends in themselves are nothing to do with the share price reaction.

I would think otherwise.

It cannot be a surprise to the market that the PRA have the power to tell banks to stop paying dividends when they predict an economic shock is coming. It is hardly a surprise either that a shock is coming.

Banks natural reaction following an increase in risk is to reduce risk, for example by reining in lending. The government and BoE do not want them to do that and the PRA telling the banks to boost their capital helps the banks to manage risk without cutting back so heavily on lending.

All of this has made it likely that the PRA would ask banks to stop paying dividends, so I am a little surprised at the market reaction. Maybe the market has reacted to the realisation that banks are carrying a lot of risk right now.

hiriskpaul
Lemon Quarter
Posts: 1942
Joined: November 4th, 2016, 1:04 pm
Has thanked: 93 times
Been thanked: 456 times

Re: Banks suspend Dividends

#296777

Postby hiriskpaul » April 1st, 2020, 11:18 pm

Arborbridge wrote:
hiriskpaul wrote: Unlike discretionary payments on prefs, or other capital instruments, unpaid dividends on the ords go into reserves and those reserves BELONG TO SHAREHOLDERS.


Yeah, right. :roll: Try paying your way with that then, in the local supermarket. If they belong to me, I elect to have them paid out, thanks.

No? Thought not, so a fat lot of good they are then - in effect they've been put beyond my usefulness in exchange for (to use a pyad expression) diddly-squat.

Arb.

Well the reserves do belong to you, but the PRA have decided you cannot have them, which is their privilege.

They are still very useful to you though. Boosting reserves will mean that banks will not need to reduce risk weighted assets by as much as they otherwise would and so future profits (and dividends) should be higher than they otherwise would be. Your reinvestment of a few pounds of dividends now should end up being money well spent.

No guarantee of that of course ;)

spasmodicus
Lemon Pip
Posts: 77
Joined: November 6th, 2016, 9:35 am
Has thanked: 13 times
Been thanked: 39 times

Re: Banks suspend Dividends

#297224

Postby spasmodicus » April 3rd, 2020, 8:44 am

God, I’m tired of hearing how LLOY is a good bet because of this that and the other. Before the recent crash, the ord share price had been declining more or less linearly over about 5 years from 77p ish to 50p, despite restoration of pretty meagre divi and, or maybe because of, frequent articles on e.g. TMF about how it is a good long term investment blah blah. I unloaded all my LLPC last year, not through any prescience, but because I needed the money. Unfortunately I didn’t unload all the ords as well. I’m a bit tempted to buy back into LLPC as they were a nice little earner in the period 2013-2019 that I held them. But they always paid dividends, when the ords didn’t. What’s the point of them now?

S


Return to “Banking Sector”

Who is online

Users browsing this forum: No registered users and 2 guests