HSBC Annual Results 2019 media release

[onslow]

Ultimately the government and the BOE backstop the banks, so they have a lot of influence and if necessary, actual authority which they use.

If you don’t like the politicisation of the banking industry, don’t invest. They come with high returns, there is also higher commensurate risk. Buy a drinks manufacturer or tech company, not immune to economic issues of course but less government interference compared to banks

[Itsallaguess]

Was this really unexpected? Was Bailey's track record not clear?

I think a reckoning of some sort was always going to come for UK banks.

This isn't 'virtue signalling', and feels much more like 'imposed penance' to me, with the view that the UK 'saved UK banking' in the past, and now it's their turn to step up to the plate and help 'save the UK economy'...

However much this is unpalatable for those of us that will have to take a break in income from our financial holdings, and however unpalatable the above may seem to holders of banks that have had to shore up their own defence-mechanisms for these types of black-swan events, there is some perverse logic in forcing them to now help come to the rescue of all the other areas of the UK economy who have not yet had to do so...

I should also add that ultimately, if this helps the recovery once it comes, then that helps everyone and is likely to play out into many other areas of our wider income-portfolios, so whilst this feels painful now, there should be some wider, long-term benefits in the future and we should welcome that when it happens...

Cheers,

Itsallaguess

[Dod101]

Ultimately the government and the BOE backstop the banks, so they have a lot of influence and if necessary, actual authority which they use.

If you don’t like the politicisation of the banking industry, don’t invest. They come with high returns, there is also higher commensurate risk. Buy a drinks manufacturer or tech company, not immune to economic issues of course but less government interference compared to banks

The appalling thing is that do not come with high returns. The total return is certainly negative even if the dividends had been paid. Easy with hindsight and if you do not own the shares (although I do not know if for instance Onslow does or not) but as one who has held HSBC (the only bank I do hold) since about 1991 I know them quite well and it would take more than the just cancelled dividend payment to make much difference to their security and that is not the point anyway but HSBC must be one of the better capitalised banks in the world.

What I object to is the bullying tactics of the PRA and the way that the banks appear just to have caved in. The PRA seems to want to turn the banks into banks for the reconstruction of the national economy and to simply brush aside the shareholders.

Dod

[monabri]

Moving on in time..the divi will no doubt one day be restored but at 51c ? There must be a temptation to rebaseline in order to move to a cover of 2.0 ? ( and not just for HSBA).

Anyone would think it's April 1st and our banks are having a big laugh....

[Dod101]

Moving on in time..the divi will no doubt one day be restored but at 51c ? There must be a temptation to rebaseline in order to move to a cover of 2.0 ? ( and not just for HSBA).

Anyone would think it's April 1st and our banks are having a big laugh....

Yes the date struck me as well.

Dod

[onslow]

I understand what your saying Dod, however the banks always have & always will be subject to government intervention given the unique economic role they play in society. The BOE regularly has huge influence over the banks, lots of day to day interactions where either they do what the BOE tells them, or more often, BOE raises an eye brow in response to a plan/proposal which means the banks go back to the drawing board. I cant think of any other industry which has such frequent interactions with their regulator.

In a previous life I worked for major UK bank and saw first hand the attitude of senior mgmt towards the BOE & FSA during 2008. Didn’t end up well for the bank or the individuals concerned, in fact I’d say there was a dereliction of duty towards shareholders as they had such a confrontational relationship towards their primary regulators which cant be in the best interests of the company.

If the returns during good times are not enough to compensate for the risk of government involvement every time there is an economic crisis, then we shouldn’t invest.

(and next time we have a garden variety recession governments /regulators all over the world will be under pressure to redo what they are doing now)

[Dod101]

We deeply regret having to make this decision, and the impact on our loyal shareholders and customers. We value their long-standing support. The Bank of England, via the Prudential Regulation Authority (PRA), requested that we not pay dividends in order to conserve capital and better enable us to support our customers through this extraordinary period. Similar requests were made to other UK banks. The PRA is our lead regulator and we agreed to their request.
We are well capitalised, more so since this decision, and are looking to continue to support the economy, our customers and wider society and help ensure growth over the medium term, allowing all to prosper including HSBC’s loyal shareholders. We will review dividend policy later in the year and we cannot pre-empt that review at this stage. We will fully take into account shareholder views, prior policies on the dividend, and many other factors including the performance and capital position of the company, the COVID-19 situation, and priorities of the company including those relating to growth and investment when that review takes place.
We note and acknowledge shareholder desire for good dividend income as we always have.
With kind regards,
Investor Relations

This has just arrived from HSBC in response to my letter to them. Please anyone who has a holding in HSBC please get in touch with them. The more shareholders who express dismay it may be that they will pay more attention. As they say this is a well capitalised bank which even in 2008/9 did not require a bail out and at that time they reduced their dividend but did not cancel it and remained a net lender to the interbank market. I am quite sure they could have afforded the now cancelled final dividend for the year without in any way compromising their security. They are a very conservative bank and the only one I would ever hold.

Dod

[Steveam]

I suspect that the government and BoE are concerned that the current economic rout might turn into a 30s style depression and they are taking the actions and others so that they’re in a better position to kick start the economy when this is over. Although this has a big impact on me I think it is probably prudent to protect the wider economy.

Best wishes,

Steve

[Wizard]

We deeply regret having to make this decision, and the impact on our loyal shareholders and customers. We value their long-standing support. The Bank of England, via the Prudential Regulation Authority (PRA), requested that we not pay dividends in order to conserve capital and better enable us to support our customers through this extraordinary period. Similar requests were made to other UK banks. The PRA is our lead regulator and we agreed to their request.
We are well capitalised, more so since this decision, and are looking to continue to support the economy, our customers and wider society and help ensure growth over the medium term, allowing all to prosper including HSBC’s loyal shareholders. We will review dividend policy later in the year and we cannot pre-empt that review at this stage. We will fully take into account shareholder views, prior policies on the dividend, and many other factors including the performance and capital position of the company, the COVID-19 situation, and priorities of the company including those relating to growth and investment when that review takes place.
We note and acknowledge shareholder desire for good dividend income as we always have.
With kind regards,
Investor Relations

This has just arrived from HSBC in response to my letter to them. Please anyone who has a holding in HSBC please get in touch with them. The more shareholders who express dismay it may be that they will pay more attention. As they say this is a well capitalised bank which even in 2008/9 did not require a bail out and at that time they reduced their dividend but did not cancel it and remained a net lender to the interbank market. I am quite sure they could have afforded the now cancelled final dividend for the year without in any way compromising their security. They are a very conservative bank and the only one I would ever hold.

Dod

My bold.

The big institutions will completely understand that if the BoE asks / requires the banks to do something there is no choice. If only small retail jnveztors are upset it will have no impact IMHO. I know you say you know HSBC well, but they have responded in the only way they can, that is how the banking industry works and not just in the UK. The fact HSBC is conservative makes the likelihood of them not following a BoE request even more remote.

[Wizard]

I have taken a view that HSBC will maintain the dividend suspension only as long as the BoE requires them to. I have therefore just added a 'unit' of HSBC at 411.5p per share.

[77ss]

I am quite disgusted, Corbyn could have written it. Sam Woods probably voted for him and has taken advice from him.

Dod

Surely its more than time to leave your Corbynophobia behind?

As for knowing how Sam Woods voted and who he takes advice from......

I appreciate that these are difficult times, but comments such as yours don't help and add nothing to this financial board. There is a better board for letting off political steam.

[Arborbridge]

I am genuinely taken aback by the reaction of typically balanced posters. Was this really unexpected? Was Bailey's track record not clear?

To be honest I do not think it was without logic. The BBC are this morning thousands of businesses on the verge of collapse. The Banks and their regulator cannot be sure what the impact will be on the banks, so holding on to capital makes sense.

From the anecdotes, the reason many small companies are not able, or not willing, to access loans from the banks is that they are demanding personal guarantees for the 20% part of the loan not guaranteed by HMG. There are many other problems in the way the banks are applying these loans - for example putting a company on draconian interest rates for smaller loans.

I think the government means to do the right thing, but Boris's Great Salvation Idea is being stifled by red tape from the banks. There will be millions of people unable to access the help they ought to have because it have become too complicated and this will make our economic problems worse than they need to be. It's not a problem of capital and not paying our dividends won't make the slightest difference: it's a problem of the way banks see the world.

Unintended consequences run the whole way though this saga, as it does indeed with the police taking it on themselves to add draconian measures to control our freedom to exercise: but that's another sad story.

Arb.

[floyd3592]

What I object to is the bullying tactics of the PRA and the way that the banks appear just to have caved in. The PRA seems to want to turn the banks into banks for the reconstruction of the national economy and to simply brush aside the shareholders.

Dod

Has this ever happened before? I certainly never gave it a 2nd thought as a 'danger' when purchasing their shares for divi income. I'll certainly consider divesting once things have 'settled down'.

[Dod101]

What I object to is the bullying tactics of the PRA and the way that the banks appear just to have caved in. The PRA seems to want to turn the banks into banks for the reconstruction of the national economy and to simply brush aside the shareholders.

Dod

Has this ever happened before? I certainly never gave it a 2nd thought as a 'danger' when purchasing their shares for divi income. I'll certainly consider divesting once things have 'settled down'.

I have no idea if this has happened before but as I was trying to say on another thread, the 'no dividend' policy ought all other things being equal to increase the share price as there are now more assets retained within the business. The dividend cancellation is not arising from a distressed situation like most dividend cuts.

Dod

[SoBo65]

Got my fingers burnt with banks last time around, have steered clear this time, would be wary on insurers too, previously they were relatively unscathed apart from AIG, but this time I read that someones on the hook for £200m each in respect of Wimbledon and Olympics cancelation cover....

[ADrunkenMarcus]

The appalling thing is that do not come with high returns. The total return is certainly negative even if the dividends had been paid. Easy with hindsight and if you do not own the shares (although I do not know if for instance Onslow does or not) but as one who has held HSBC (the only bank I do hold) since about 1991 I know them quite well and it would take more than the just cancelled dividend payment to make much difference to their security and that is not the point anyway but HSBC must be one of the better capitalised banks in the world.

I do not own HSBC. The only bank I hold is STAN which represents 0.8 percent of my portfolio now, largely due to price falls!

However, the issue of long term returns is worth considering. I have ignored LLOY and RBS as they are particularly bad cases.

BARC is trading at 84p, down from 242p in October 1998.
STAN is trading at 414p, down from 504p in October 1998.
HSBA is trading at 411p, up from 391p in October 1998.

That's a nominal capital loss for BARC and STAN, let alone inflation adjusted, even if HSBA is just above its share price over 21 years ago!

HSBC could have been purchased in early April 1991 for 55p, so anyone purchasing then would have a capital gain today and probably one which more than matches inflation. However, all that growth had really been achieved in the 1990s already.

Since the credit crunch, they have struggled to get their return on equity even close to double digits in most cases - not making an economic profit at all.

These have not been good businesses and have now lost the dividend propping up their share prices.

Best wishes

Mark.

[digitaria]

BoE dividend pressure reignites HSBC domicile debate.

That didn't take long. Probably the routine sabre rattling.

I note, in passing, that City of London IT, a trust for widows & orphans if ever there was one, has HSBC as one of it's largest holdings. They may be digging deep into their reserves in 2020. There will be repercussions all over the place.

My MP has responded to my message and says he will bring the position of dividend-dependent retirees to the attention of the Chancellor. I won't hold my breath awaiting a U-turn.

[MDW1954]

What I object to is the bullying tactics of the PRA and the way that the banks appear just to have caved in. The PRA seems to want to turn the banks into banks for the reconstruction of the national economy and to simply brush aside the shareholders.

Dod

Has this ever happened before? I certainly never gave it a 2nd thought as a 'danger' when purchasing their shares for divi income. I'll certainly consider divesting once things have 'settled down'.

Quite common in 2008. Got bailout? No divis. But HSBC didn't get a bailout, and could carry on.

MDW1954

[Dod101]

AS it happens I bought HSBC for the first time at £1.896 in April 1991, 4000 shares. less than 2 years later I sold half of the holding at £5.12 on 13 January 1993 and would you believe by April 1998 I sold some at £17.66. All that was before they had a 3 for 1 bonus issue on 28 May 1999. That was probably when they moved to the London holding company. It was a wonderful decade and in that time the big issue was buying up the rest of the Midland bank, disclosing their hidden reserves and the move to London, after which it has been pretty well down hill ever since. Sir William Purves retired not long after that and the new Chairman Sir John Bond went on the disastrous buying spree.

Presumably your 55p in 1991 adjusts my figures to allow for the bonus shares and the rights issue in 2009.

But you are right they have done nothing in recent years as they were caught up in scandal after another which were acquired in that buying spree of the first decade of this century.

Dod

[scrumpyjack]

I see the FT reports that some directors and executives of HSBC are now pushing for the bank to move its domicile following the instruction to cancel dividends.