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UK regulators considering allowing banks to restart paying dividends

monabri
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Re: UK regulators considering allowing banks to restart paying dividends

#365170

Postby monabri » December 11th, 2020, 3:48 pm

The Investors Chron published some calculations on yield based on the "rules" diktat of the PRA.
https://www.investorschronicle.co.uk/ne ... dium=email

(The report can be viewed for non subscribers if one searches in "incognito " mode).

The yield in the last column being the prediction.

Bank     | Share price (p) | RWA test (£bn) | Implied yield  | Profits test (£bn) | Implied yield  | Lower test
Barclays | 137 | 0.627 | 2.64% | 1.05 | 4.41% | 2.64%
HSBC | 402 | 1.310 | 1.60% | 0.72 | 0.89% | 0.89%
Lloyds | 35 | 0.415 | 1.67% | 0.70 | 2.82% | 1.67%
NatWest | 156 | 0.358 | 1.89% | 0.02 | 0.10% | 0.10%


Not exactly high yield! Too much interference....

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Re: UK regulators considering allowing banks to restart paying dividends

#365181

Postby scrumpyjack » December 11th, 2020, 4:09 pm

On that basis Barclays could pay a final dividend at most of 0.6p!

(2.64% x 137p = 3.6p less 2019 interim paid 3p)

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Re: UK regulators considering allowing banks to restart paying dividends

#365184

Postby Dod101 » December 11th, 2020, 4:09 pm

These are a joke by any standards and will surely have the bank managements spitting blood. Who would buy or hold bank share at these yields? (Especially when the share prices are at the bombed out levels that the are)

The PRA ought to get a kick in the teeth but I am not sure who could administer that or how.

Dod

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Re: UK regulators considering allowing banks to restart paying dividends

#365204

Postby dealtn » December 11th, 2020, 4:51 pm

Dod101 wrote:These are a joke by any standards and will surely have the bank managements spitting blood. Who would buy or hold bank share at these yields? (Especially when the share prices are at the bombed out levels that the are)



I could "(Especially when the share prices are at the bombed out levels that the are)"

In fact I would be much less inclined to buy them were the share price otherwise, that would be when my inclination would more likely be to sell.

Strange how "buy low, sell high", doesn't seem to resonate with some - those that see dividends as the main reason for investing, perhaps.

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Re: UK regulators considering allowing banks to restart paying dividends

#365217

Postby Gengulphus » December 11th, 2020, 5:43 pm

Dod101 wrote:In fact, Goodwin did bankrupt RBS. It was only the intervention of the Government that propped it up which is clearly emphasised by the large shareholding it still has in RBS. Where was the PRA then? ...

Nowhere - but it does have a sort-of-excuse in the fact that it was only created some years later, in 2013! But it's only a sort-of-excuse, not a very good excuse indeed, because the Prudential Regulation Authority and the Financial Conduct Authority were basically created by splitting up the functions of the previous Financial Services Authority, with some reorganisation to muddy the waters... So I suspect each of the PRA and the FCA would be able to make some sort of "We had little to do with it, it was the other lot who mainly dealt with RBS back then" case based on different interpretations of what was done!

Gengulphus

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Re: UK regulators considering allowing banks to restart paying dividends

#365232

Postby Gengulphus » December 11th, 2020, 6:28 pm

pyad wrote:I've always used forecast divs to get an idea of the likely immediate yield when considering HYP shares. This has nothing to do with SI. ...

For the benefit of anyone reading this who doesn't know why forecast dividends have nothing to do with SI (Strategic Ignorance): SI says to ignore all long-term predictions about the future of the company (including any such predictions that one comes up with oneself). The forecast dividends many HYPers pay attention to are 1-year forecasts and sometimes 2-year forecasts - in both cases, they're short-term. If a HYPer were to advocate using 10-year forecast dividends, that would conflict with using SI - but I've never seen a HYPer do that!

And to be clear, that's only meant to say "using SI and using forecast dividends don't conflict with each other, so don't attack HYPers for using both", not to imply that HYPers must use SI.

Gengulphus
Moderator Message:
Because of duplication this thread was moved away from HYP-P and later merged with another within Banking Sector. As a consequence the HYP slant on this topic is just one of many that are now on-topic. You may have been aware of this when you posted; you might also have not realised, depending upon your way in on this occasion. - Chris

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Re: UK regulators considering allowing banks to restart paying dividends

#365253

Postby Gengulphus » December 11th, 2020, 7:21 pm

idpickering wrote:
ReallyVeryFoolish wrote:Bizzarre, I just checked and Lloyd's are down more than 4 per cent today. It's one of my dog stocks in my damaged goods portfolio. I need it to pull itself out of the dog house.

I had to smile RVF. Maybe we should all have a 'damaged goods portfolio'. :D

Or possibly a Damaged Old Goods portfolio? ;-)

More seriously, there are both good and bad aspects to the news: the good aspect is that the banks will be allowed to pay some dividends, and the bad aspect is that the PRA is still willing to overtly interfere in the banks' decisions about how much they'll pay - i.e. before this news, its overt interference last March/April could have been thought of as a one-off emergency response, now that isn't really a viable interpretation for even the most optimistic. So the bank share price falls could be nothing more than that bad aspect outweighing the good aspect, or counterbalancing it and other news (e.g. about Brexit) pushing prices down.

Gengulphus

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Re: UK regulators considering allowing banks to restart paying dividends

#365274

Postby Dod101 » December 11th, 2020, 8:46 pm

dealtn wrote:
Dod101 wrote:These are a joke by any standards and will surely have the bank managements spitting blood. Who would buy or hold bank share at these yields? (Especially when the share prices are at the bombed out levels that the are)



I could "(Especially when the share prices are at the bombed out levels that the are)"

In fact I would be much less inclined to buy them were the share price otherwise, that would be when my inclination would more likely be to sell.

Strange how "buy low, sell high", doesn't seem to resonate with some - those that see dividends as the main reason for investing, perhaps.


As an income investor bank shares are not much use to me, and in fact although they might be cheap they can stay that way for a long time. They have for instance been at low levels for about the last 7 months or so and show every indication of staying there. Buy low and sell high resonates with me but currently I cannot see any reason for them to go higher.

Dod

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Re: UK regulators considering allowing banks to restart paying dividends

#365279

Postby dealtn » December 11th, 2020, 9:00 pm

Dod101 wrote:
dealtn wrote:
Dod101 wrote:These are a joke by any standards and will surely have the bank managements spitting blood. Who would buy or hold bank share at these yields? (Especially when the share prices are at the bombed out levels that the are)



I could "(Especially when the share prices are at the bombed out levels that the are)"

In fact I would be much less inclined to buy them were the share price otherwise, that would be when my inclination would more likely be to sell.

Strange how "buy low, sell high", doesn't seem to resonate with some - those that see dividends as the main reason for investing, perhaps.


As an income investor bank shares are not much use to me, and in fact although they might be cheap they can stay that way for a long time. They have for instance been at low levels for about the last 7 months or so and show every indication of staying there. Buy low and sell high resonates with me but currently I cannot see any reason for them to go higher.

Dod


Yes, but you asked "Who would buy or hold bank shares....", having clearly suggested it wouldn't be somebody like you. I gave you an example of someone whose thinking might be different to yours.

And yes, you may be correct, the share price might not rise from here, and turn out to be a bad investment. That doesn't mean there won't be buyers, with genuine reasons at this level though.

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Re: UK regulators considering allowing banks to restart paying dividends

#365282

Postby johnhemming » December 11th, 2020, 9:08 pm

dealtn wrote:And yes, you may be correct, the share price might not rise from here, and turn out to be a bad investment. That doesn't mean there won't be buyers, with genuine reasons at this level though.


My own feeling is that even with a no-deal brexit (which is not certain at the moment, but quite likely) I would be pretty certain that investing in UK banks is better than investing in GBP.

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Re: UK regulators considering allowing banks to restart paying dividends

#365313

Postby Dod101 » December 11th, 2020, 10:39 pm

dealtn wrote:Yes, but you asked "Who would buy or hold bank shares....", having clearly suggested it wouldn't be somebody like you. I gave you an example of someone whose thinking might be different to yours.

And yes, you may be correct, the share price might not rise from here, and turn out to be a bad investment. That doesn't mean there won't be buyers, with genuine reasons at this level though.


I happen to hold (even at the current rather depressed levels) rather more than what some call a 'full' holding. By that I mean more than an average holding. I have currently 30 shares, mostly for income and fewer for growth as I live off my investment income. I am thinking of selling about 40% of that holding to bring it down below my average holding size but I am in no great rush because you never know the share price might rise a bit and I will see how the wind is blowing by early January. I would not be buying now.

I hope there are buyers at this level, but I do not see sunny uplands for banks any time soon, or even in the next year or two, although the PRA is said to be thinking of allowing banks a free reign again later on, but of course by that time we could all be dead, or wallowing in the effects of a no deal Brexit or something. Banks just do not give me any comfort or any reason for comfort that I can see.

Dod

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Re: UK regulators considering allowing banks to restart paying dividends

#366063

Postby hiriskpaul » December 14th, 2020, 12:59 pm

FWIW I think this would be a very good entry point for anyone wanting UK bank shares. Underlying profitability is good and the share prices low now largely because of the EU trade deal uncertainity. If that deal falls apart then prices will undoubtedly go lower and a better opportunity will present itself. No deal will certainly be painful to profits in the short term, but it is impossible to really predict the extent of the damage. For one thing it heavily depends on the bailout provided by the government in the form of stimulus and for those such as Lloyds, with heavy UK property exposure, what happens to property prices. Again though, the government is likely to stimulate and prop up the property market.

Regarding historical NIMs, I don't think there is much point comparing. Regulations, overheads and capital requirements are so different now. The ability of banks to gouge their customers heavily curtailed as well.

I will not invest though because I already have significant exposure to banks through their prefs and bonds. I also have a significant "bet" on the outcome of trade negotiations via FTSE puts.


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