The Lemon Fool

From the FT

UK banks expect regulator to order dividend freeze
Action likely this week to shore up lenders’ capital levels for coronavirus outbreak

Banks in the UK are braced for the country’s top financial supervisor to put a stop to £7.5bn of dividend payments due over the next few weeks in a move designed to shore up capital levels during the coronavirus outbreak.

The Prudential Regulation Authority, the supervisory arm of the Bank of England, is running out of time to make a decision on whether to block the payments, with Barclays due to pay a full-year dividend of 6p per share on Friday.

https://www.ft.com/content/6f2d69f3-37d ... b879aed40b

During the downturn I haven't increased my Financials exposure, as it's already overweight.
Not quite true... have bought some ITs, oh, and Provident Financial bonds, and now I think of it, LGEN, and Aviva Prefs.
Well, not increased it much.

More 'news' today:

Banks in Britain could face losses of more than £15 billion on loans that backed leveraged buyouts and other highly geared transactions, research suggests. These loans risk going sour as an economic slump affects the cashflow of companies with heavy debts. Insurers, hedge funds and small investors in corporate bond funds are also at risk. - The Times

We're all doooomed.

V8

I hope this doesn’t include a freeze on UK Bank Pref. Dividends.

Owen.

I haven't read the article.

Not a problem if you still hold the shares, but what happens if you sold during the period whilst "xd", and it no longer get's paid. The "benefit" of the dividend cancellation now resides with the buyer. Is there any indication how this inequality is corrected?

I raised this with one of the early cancellations. By cancelling the dividend after the XD date, they have unwittingly caused a false market in their shares which is the point you are making.

I have not seen this point discussed anywhere.

Dod

dealtn wrote:I haven't read the article.

Not a problem if you still hold the shares, but what happens if you sold during the period whilst "xd", and it no longer get's paid. The "benefit" of the dividend cancellation now resides with the buyer. Is there any indication how this inequality is corrected?

It isn't. There is no recompense and this has happened a number of times.

If the bank (eg Barclays) were to suspend the payment of the dividend (eg for 6 months), but not cancel it, it could be paid the existing ex div entitled shareholders if and when it is paid.

Persimmon recently cancelled an interim dividend of 125p per share after it had gone xd. No one has suggested any compensation to anyone who had sold the shares xd.

scrumpyjack wrote:

dealtn wrote:I haven't read the article.

Not a problem if you still hold the shares, but what happens if you sold during the period whilst "xd", and it no longer get's paid. The "benefit" of the dividend cancellation now resides with the buyer. Is there any indication how this inequality is corrected?

It isn't. There is no recompense and this has happened a number of times.

If the bank (eg Barclays) were to suspend the payment of the dividend (eg for 6 months), but not cancel it, it could be paid the existing ex div entitled shareholders if and when it is paid.

Persimmon recently cancelled an interim dividend of 125p per share after it had gone xd. No one has suggested any compensation to anyone who had sold the shares xd.

So the xd buyers get a bonus! So in this case it's Caveat Venditor instead of the usual Caveat Emptor, interesting.

Barclays has cancelled their dividend

https://pbs.twimg.com/media/EUdns08X0AE ... name=large

Note that the Prudential Regulation Authority has requested it.

Maybe the insurers next?

ElectronicFur wrote:Barclays has cancelled their dividend

https://pbs.twimg.com/media/EUdns08X0AE ... name=large

Note that the Prudential Regulation Authority has requested it.

Not sure where you found that image, but googling some of the quoted text found this confirmation - and more...

Barclays, Lloyds and NatWest said on Tuesday that they would not be returning money to shareholders via dividends, or buying back their own shares, until the end of the year.

https://www.milfordmercury.co.uk/news/n ... rus-fight/

OwenSwansea wrote:I hope this doesn’t include a freeze on UK Bank Pref. Dividends.

Owen.

Would not surprise me if it did.

More here...

Banks are not likely to need the extra money that they save from scrapping dividends, the PRA said, but the extra headroom will allow them to support the economy this year.

https://www.standard.co.uk/news/uk/brit ... 03396.html

Breelander wrote:Not sure where you found that image, but googling some of the quoted text found this confirmation - and more...

Business editor of the Times, Richard Fletcher, tweeted it.

The Standard article you linked to also says:

"Standard Chartered, NatWest, Santander, the Royal Bank of Scotland, Nationwide, Lloyds, HSBC and Barclays have all agreed to cancel dividends, the PRA said."

OwenSwansea wrote:I hope this doesn’t include a freeze on UK Bank Pref. Dividends.

I have a few ords but rather a lot of Prefs. I'll be peed off if they suspend the divi, but those that are cumulative will have to be paid eventually, which is more than canm be said for the divis on the ords.
The spreads between cumulative and not have narrowed, this will remind people of the key difference.
I'll be looking at the RNS tomorrow.

Anyway, if this news is true, could be some buying opportunities tomorrow.
When the hysteria evaporates, purchases we've made in recent times will look rather good.

V8

The text on Barclays specifically talks about cancellation of the ords so perhaps prefs may be spared if that carries across elsewhere.

What a pain

Both Lloyds & HSBC for me.

Best wishes,

Steve

Breelander wrote:More here...

Banks are not likely to need the extra money that they save from scrapping dividends, the PRA said, but the extra headroom will allow them to support the economy this year.

https://www.standard.co.uk/news/uk/brit ... 03396.html

So in what way does letting the banks keep it but not use it help support the economy that distributing it to the shareholders so they can spend it buying things the economy produces doesn't.

Adrian

And from the FT report ...

“The PRA also wrote to the country’s insurers, asking them to “pay close attention to the need to protect policyholders” when making decisions on shareholder payouts and staff bonuses this year, but it did not force them to cancel any existing or future dividends.”

Best wishes,

Steve

Steveam wrote:And from the FT report ...

For those who prefer the original source:

https://www.bankofengland.co.uk/prudential-regulation/letter/2020/letter-from-sam-woods-to-insurers-on-distribution-of-profits