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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!

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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.

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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.

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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

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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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Re: Banks suspend Dividends

#350685

Postby Dod101 » October 26th, 2020, 10:34 am

A Times headline this morning.

'Banks 'bartering' for the right to restart dividends.'

And we were worried about Corbyn? The B of E has all but nationalised our banks without having to spend a penny.

Dod

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Re: Banks suspend Dividends

#350687

Postby dealtn » October 26th, 2020, 10:36 am

Dod101 wrote:A Times headline this morning.

'Banks 'bartering' for the right to restart dividends.'

And we were worried about Corbyn? The B of E has all but nationalised our banks without having to spend a penny.

Dod


You have a different definition of nationalisation to me then.

Shares still freely tradeable to buy and sell and no Government intervention in the market

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Re: Banks suspend Dividends

#350700

Postby Dod101 » October 26th, 2020, 10:54 am

dealtn wrote:
Dod101 wrote:A Times headline this morning.

'Banks 'bartering' for the right to restart dividends.'

And we were worried about Corbyn? The B of E has all but nationalised our banks without having to spend a penny.

Dod


You have a different definition of nationalisation to me then.

Shares still freely tradeable to buy and sell and no Government intervention in the market


With respect I think you probably know what I mean. I did not claim it was nationalisation. I said 'all but' in the sense that they are directing the banks in the way they would do if they were nationalised. Why do people have to haver a niggle so much?

Anyway, the article goes on to say that 'Banks are pressing regulators to let them pay dividends because they fear that the policy has made them unattractive to investors'. That much I think is obvious.

Dod

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Re: Banks suspend Dividends

#350704

Postby johnhemming » October 26th, 2020, 11:07 am

The government, have, however, given the banks some government underwritten loans to dole out.

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Re: Banks suspend Dividends

#350710

Postby dealtn » October 26th, 2020, 11:20 am

Dod101 wrote:
dealtn wrote:
Dod101 wrote:A Times headline this morning.

'Banks 'bartering' for the right to restart dividends.'

And we were worried about Corbyn? The B of E has all but nationalised our banks without having to spend a penny.

Dod


You have a different definition of nationalisation to me then.

Shares still freely tradeable to buy and sell and no Government intervention in the market


With respect I think you probably know what I mean. I did not claim it was nationalisation. I said 'all but' in the sense that they are directing the banks in the way they would do if they were nationalised. Why do people have to haver a niggle so much?

Anyway, the article goes on to say that 'Banks are pressing regulators to let them pay dividends because they fear that the policy has made them unattractive to investors'. That much I think is obvious.

Dod


I suspect some investors might find a non-dividend paying stock unattractive, indeed some funds might be barred from holding them if the non-Dividend status is anything more than temporary. I would imagine plenty of investors wouldn't worry about the dividend absence, and would be looking more at the Capital, and potential bad debt situation.

Returning the dividend would be a "signal" the regulators are less concerned about the tail risks associated with the finance system. Retained Capital will be rising at all the UK banks at the moment, and whether it is "bartering" or not I would imagine it perfectly normal for the regulators to be in discussions with the Banks now as they said they would be reviewing the situation in Q4. I would be more concerned if the Banks weren't involved - that was probably the single biggest mistake in the Dividend review at the start of the year.

I would expect dividends will be allowed to resume, but this would be tied to a demonstration of acceptable Capital remaining in the business, which it hasn't been before. The regulators have for many years asked Banks to be scenario tested with respect to their Capital base, and I think tying the dividend decision into this won't be considered unacceptable by Bank boards. In fact I suspect the "better" banks might even welcome it as it will allow them to demonstrate their "superiority" in way that previous tests didn't.

(Haven't read the article, as it is firewalled, and as an ex-Banker I am experienced at how poorly financial journalism is at understanding the Banking system, at least in the UK. Maybe this article is different.)

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Re: Banks suspend Dividends

#350717

Postby Dod101 » October 26th, 2020, 11:43 am

Well it does not need an ex banker to tell us what dealtn has written. It is in any case pretty much what is likely to happen I am sure. I do not understand though the comment about Banks not being involved 'in the Dividend review at the start of the year'. If that was a mistake it was of course a mistake by the PRA but they got what they wanted without the effort of bringing the Banks with them. Anyway, some of the banks would have (maybe did?) protested mightily and the PRA would have most likely put its foot down come what may.

Tomorrow we get the third quarter numbers from HSBC. Hopefully they will a high amount of surplus capita. This is probably reflected in today's share price. Now at £3.24, the highest for a while and up 1% or so this morning.

Dod

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Re: Banks suspend Dividends

#350740

Postby dealtn » October 26th, 2020, 12:54 pm

Dod101 wrote: I do not understand though the comment about Banks not being involved 'in the Dividend review at the start of the year'


The regulators, both in the UK and Europe, didn't discuss the Dividend suspension with the Banks, but imposed their decision on them. No doubt they could use the rationale that time was urgent, and a discussion would have meant a delay, as justification. In hindsight they might have chosen to act differently and consulted. Now that time is less pressing, and having already announced a review for Q4, they won't be wanting to be in a position of not involving Banks in their review and an accusation of "imposing" anything. It would be very surprising if Bank's aren't at least consulted on the next move.

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Re: Banks suspend Dividends

#350746

Postby Dod101 » October 26th, 2020, 1:11 pm

dealtn wrote:
Dod101 wrote: I do not understand though the comment about Banks not being involved 'in the Dividend review at the start of the year'


The regulators, both in the UK and Europe, didn't discuss the Dividend suspension with the Banks, but imposed their decision on them. No doubt they could use the rationale that time was urgent, and a discussion would have meant a delay, as justification. In hindsight they might have chosen to act differently and consulted. Now that time is less pressing, and having already announced a review for Q4, they won't be wanting to be in a position of not involving Banks in their review and an accusation of "imposing" anything. It would be very surprising if Bank's aren't at least consulted on the next move.


I know, but the PRA treated the banks very badly, virtually holding a gun to their collective heads. The matter was well covered earlier in this very tread I think (or maybe elsewhere). I asked my question because you were implying some new info. Thanks anyway.

Dod

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Re: Banks suspend Dividends

#350775

Postby scrumpyjack » October 26th, 2020, 2:44 pm

What I certainly don't want is banks paying dividends and then having a rights issue. That makes no sense.
Better to hold off on dividends rather than that.

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Re: Banks suspend Dividends

#350782

Postby Dod101 » October 26th, 2020, 3:11 pm

scrumpyjack wrote:What I certainly don't want is banks paying dividends and then having a rights issue. That makes no sense.
Better to hold off on dividends rather than that.


Agreed but most of them seem to have surplus capital at the moment and per the recent exchange the PRA seems to have a good grip on this at the moment.

Dod

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Re: Banks suspend Dividends

#350784

Postby scrumpyjack » October 26th, 2020, 3:24 pm

Dod101 wrote:
scrumpyjack wrote:What I certainly don't want is banks paying dividends and then having a rights issue. That makes no sense.
Better to hold off on dividends rather than that.


Agreed but most of them seem to have surplus capital at the moment and per the recent exchange the PRA seems to have a good grip on this at the moment.

Dod


Yes but the report in today's Times says the BOE allowing dividends to resume would be on the basis it makes it easier for banks to raise further equity subsequently. I certainly don't think that is good for bank shareholders.

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Re: Banks suspend Dividends

#352009

Postby monabri » October 30th, 2020, 5:49 pm

With Covid Phase 2 I can't see the banks being allowed by the PRA to pay a dividend. It seems we are rewinding the clock to March 2020.

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Re: Banks suspend Dividends

#352042

Postby ADrunkenMarcus » October 30th, 2020, 10:17 pm

monabri wrote:With Covid Phase 2 I can't see the banks being allowed by the PRA to pay a dividend. It seems we are rewinding the clock to March 2020.


Even if they were permitted, there's a serious question about whether capital would be better directed into share buybacks at these prices. We have banks such as STAN trading at c. 0.4 times book value.

Best wishes

Mark.

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Re: Banks suspend Dividends

#352048

Postby Dod101 » October 30th, 2020, 10:26 pm

Like everything at the moment things are changing so quickly that it is impossible to know and very difficult to speculate about what is likely to happen. The only thing we do know is that the banks have not come out of the first phase of Covid anything like as badly as might have been and the CET levels are far above the minimum required.

Dod


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