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Banks suspend Dividends

hiriskpaul
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Re: Banks suspend Dividends

#297790

Postby hiriskpaul » April 4th, 2020, 4:51 pm

Economic forecasters are unreliable at the best of times. Right now I can see no point in giving them any credence at all, but yes it could happen. Worldwide depression on the scale last seen in the Great Depression. If that happened, then yes NWBD, etc. are probably toast.

I am thinking more along the lines of what would happen if we had a repeat of 2008. This time round Banks are much better capitalised and their balance sheets not full of overrated crap, so they are starting from a good place. Resolution/bail-in is possible of course, but that would only happen to banks that could not raise capital themselves. Raising capital might be really expensive in terms of share dilution or debt (Barclays had to issue those 14% bonds to the qataris to avoid taking direct government help), but most banks will do their best to avoid a government bailout as in that situation the ords are probably worthless.

I am hoping of course that the banks will not need more capital at all.

Depending on how things go, these prefs could easily get a lot cheaper yet. I am definitely not saying prices have bottomed!

hiriskpaul
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Re: Banks suspend Dividends

#297793

Postby hiriskpaul » April 4th, 2020, 4:57 pm

88V8 wrote:Risk.. conversation currently in progress here https://lemonfool.co.uk/viewtopic.php?f ... 3&start=20

Buy when others are fearful.. if I weren't so overweight Financials I would have been buying more, and may do anyway. So many 'bargains' at present, one hardly knows where to turn.

Is there a pusher in SAN? If I knew that I had forgotten, but do agree they might try an Aviva, and I think would be less amenable to pressure. Well, for the nervous there's always Ecclesiastical.

V8

I don't hold SAN, but as with all prefs, not paying dividends does block dividends on the ords. From memory I think they have the same requirement to issue more prefs in compensation for not paying as NWBD, provided they have reserves that would cover payment, etc. I need to check the prospectus on that though as I cannot remember precise details.

GoSeigen
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Re: Banks suspend Dividends

#297886

Postby GoSeigen » April 4th, 2020, 11:05 pm

Tara wrote:Many economic forecasters are already forecasting a depression and US unemployment rates of well over 30%. This is a higher unemployment rate than in the Great Depression.

Many economic forecasters are also forecasting the same for the UK. Do you think that such forecasts are very unlikely or even a small possibility?

So in such a situation of depression, what do you think that NWBD would be worth ? Do you think that NWBD will still be paying dividends or have any value left ?

https://www.cnbc.com/2020/03/30/coronav ... -says.html

https://www.theguardian.com/world/2020/ ... ords-began


Forecasts are a trailing indicator, so I pay little attention to them. I'd suggest other investors do the same and instead take a look at the balance sheet of these banks.

In a depression all bets are off. One should largely hold cash and wait for markets to bottom out.

Personally I am still buying bank securities.

GS

hiriskpaul
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Re: Banks suspend Dividends

#298048

Postby hiriskpaul » April 5th, 2020, 5:01 pm

hiriskpaul wrote:
88V8 wrote:Risk.. conversation currently in progress here https://lemonfool.co.uk/viewtopic.php?f ... 3&start=20

Buy when others are fearful.. if I weren't so overweight Financials I would have been buying more, and may do anyway. So many 'bargains' at present, one hardly knows where to turn.

Is there a pusher in SAN? If I knew that I had forgotten, but do agree they might try an Aviva, and I think would be less amenable to pressure. Well, for the nervous there's always Ecclesiastical.

V8

I don't hold SAN, but as with all prefs, not paying dividends does block dividends on the ords. From memory I think they have the same requirement to issue more prefs in compensation for not paying as NWBD, provided they have reserves that would cover payment, etc. I need to check the prospectus on that though as I cannot remember precise details.

Just looked at the SAN prospectus and it is not quite how I remembered. If NWBD divis are not paid and sufficient profits, etc. are available to make a payment, then 4/3 times the dividend is awarded in new NWBD prefs to holders (issued at par). With SAN, it is similar, but not scaled up by 4/3.

The other peculiarity with SAN is with the tax credit language. The gross payment is fixed, but if there is a tax credit (as there was until Osborne change the rules), the payment is reduced by the amount of the tax credit. This meant that the dividend actually rose when Osborne abolished the old daft system and means there is a risk that it could drop again if a new tax credit system came along. This is unusual, but not unique. BBYB has the same language and there is or was another, but I cannot recall what it is.

88V8
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Re: Banks suspend Dividends

#298078

Postby 88V8 » April 5th, 2020, 6:39 pm

Thankyou.
I am quite full of NMBD and SAN... funny how SAN almost always outyields SANB.. but in the year or three the current price will seem a real snip.
I hope.

V8

hiriskpaul
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Re: Banks suspend Dividends

#311145

Postby hiriskpaul » May 22nd, 2020, 5:29 pm

Lloyds pulls the plug on its AT1 call option:

https://www.londonstockexchange.com/exc ... 50932.html


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