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UK regulators considering allowing banks to restart paying dividends

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

#364942

Postby seekingbalance » December 10th, 2020, 10:18 pm

Dod101 wrote:Far more regulation than I would want if the FT article is correct.

Dod


Hear, hear. This is quite ridiculous. Our banks are so over regulated we might as well just nationalise the lot of them and have the Bank of England run them all.

We get none of the benefits of a competitive banking sector, no rewards for risk taking, and yet we get ineffective cash distribution for rescue packages when the government enlists the banks to solve financial crises. Owning banks in the U.K. seems to be lose, lose, lose.

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Re: UK regulators considering allowing banks to restart paying dividends

#364966

Postby idpickering » December 11th, 2020, 4:37 am

seekingbalance wrote:
Dod101 wrote:Far more regulation than I would want if the FT article is correct.

Dod


Hear, hear. This is quite ridiculous. Our banks are so over regulated we might as well just nationalise the lot of them and have the Bank of England run them all.

We get none of the benefits of a competitive banking sector, no rewards for risk taking, and yet we get ineffective cash distribution for rescue packages when the government enlists the banks to solve financial crises. Owning banks in the U.K. seems to be lose, lose, lose.


No wonder I’m in no rush to buy back into them. I used to own Lloyd’s and HSBC. Maybe owning them right now is diworsification in action, but each to their own.

Ian.

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Re: UK regulators considering allowing banks to restart paying dividends

#364971

Postby GoSeigen » December 11th, 2020, 6:38 am

idpickering wrote:
seekingbalance wrote:
Dod101 wrote:Far more regulation than I would want if the FT article is correct.

Dod


Hear, hear. This is quite ridiculous. Our banks are so over regulated we might as well just nationalise the lot of them and have the Bank of England run them all.

We get none of the benefits of a competitive banking sector, no rewards for risk taking, and yet we get ineffective cash distribution for rescue packages when the government enlists the banks to solve financial crises. Owning banks in the U.K. seems to be lose, lose, lose.


No wonder I’m in no rush to buy back into them. I used to own Lloyd’s and HSBC. Maybe owning them right now is diworsification in action, but each to their own.

Ian.


Absolutely backwards thinking. This is all very bullish for bank shares. A wonderful purchase at recent prices.

GS

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Re: UK regulators considering allowing banks to restart paying dividends

#364975

Postby Dod101 » December 11th, 2020, 6:57 am

GoSeigen wrote:
idpickering wrote:
seekingbalance wrote:
Hear, hear. This is quite ridiculous. Our banks are so over regulated we might as well just nationalise the lot of them and have the Bank of England run them all.

We get none of the benefits of a competitive banking sector, no rewards for risk taking, and yet we get ineffective cash distribution for rescue packages when the government enlists the banks to solve financial crises. Owning banks in the U.K. seems to be lose, lose, lose.


No wonder I’m in no rush to buy back into them. I used to own Lloyd’s and HSBC. Maybe owning them right now is diworsification in action, but each to their own.

Ian.


Absolutely backwards thinking. This is all very bullish for bank shares. A wonderful purchase at recent prices.

GS


As a short term punt they should be OK and they appear as you say to be ridiculously under priced at the moment but that is no answer as a long term investment. The sooner HSBC for instance incorporates elsewhere the better. Why should they have their worldwide business in effect controlled by the PRA? Ring fencing should work both ways.

It is in all our interests to have a strong and resilient banking sector but if this sort of micro managing is actually going on and is to become the norm that I think is very unhealthy.

Dod

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Re: UK regulators considering allowing banks to restart paying dividends

#364980

Postby idpickering » December 11th, 2020, 7:11 am

Dod101 wrote:
GoSeigen wrote:
idpickering wrote:
No wonder I’m in no rush to buy back into them. I used to own Lloyd’s and HSBC. Maybe owning them right now is diworsification in action, but each to their own.

Ian.


Absolutely backwards thinking. This is all very bullish for bank shares. A wonderful purchase at recent prices.

GS


As a short term punt they should be OK and they appear as you say to be ridiculously under priced at the moment but that is no answer as a long term investment. The sooner HSBC for instance incorporates elsewhere the better. Why should they have their worldwide business in effect controlled by the PRA? Ring fencing should work both ways.

It is in all our interests to have a strong and resilient banking sector but if this sort of micro managing is actually going on and is to become the norm that I think is very unhealthy.

Dod


Backwards thinking? I don't think so. It's your money to invest how you wish. I'm more in line with Dod's comments above. I'm not saying never, but I'd need some convincing to invest in a bank right now. It's HYPing I'm doing, not punting. (ie gambling). Although I get that all investing is not a certainty obviously, before someone picks me up on that.

Ian.

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Re: UK regulators considering allowing banks to restart paying dividends

#364992

Postby scrumpyjack » December 11th, 2020, 8:17 am

Quite. Though bank shares have bounced back somewhat, in the context of a look at the longer term chart of bank shares, it is distinctly a 'dead cat' bounce!

Whilst I don't intend to sell (that's a triumph of hope over experience), to me they are uninvestable as a new investment as they are so much of the mercy of political factors and greedy incompetent management.

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Re: UK regulators considering allowing banks to restart paying dividends

#364995

Postby johnhemming » December 11th, 2020, 8:23 am

scrumpyjack wrote:Quite. Though bank shares have bounced back somewhat, in the context of a look at the longer term chart of bank shares, it is distinctly a 'dead cat' bounce!

Whilst I don't intend to sell (that's a triumph of hope over experience), to me they are uninvestable as a new investment as they are so much of the mercy of political factors and greedy incompetent management.


I would disagree about "dead cat" that tends to be a market response where a stock may or may not have been oversold and there is then a bounce in the following days.

What we have is a changed environment moving on from Covid towards some certainty that Covid will come to an end. This combines with quarterly reports which if they say anything say that banks will not need more capital. That is perhaps the key to investment.

I don't tend to share your criticism more generally of management and sovereign risk is always a factor that needs consideration for any business anywhere.

Some management mishandle businesses and some times they end up with flawed remuneration packages that make them do things which are not in the interests of the business or any of its stakeholders apart from senior management. However, that is not more generally a problem.

The banks have ticked off a bit this week (and are still ticking down)because of the greater probability of no deal (which is currently the favourite in betting markets). However, I think the risk of no deal was factored in from 2016 onwards which is one thing that has held back UK bank share prices.

Hence if you see banks as something which should recover and then pay a reasonable dividend in say a year I think that is an investment proposition. Then again I have been buying the banks at lower prices than they currently are.

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Re: UK regulators considering allowing banks to restart paying dividends

#364999

Postby scrumpyjack » December 11th, 2020, 8:44 am

PPI cost banks £53 billion, Goodwin's mismanagement nearly bankrupted RBS. The catalogue of bank management incompetence is long and expensive! It has long been the tradition in UK banking that management bonuses take priority over shareholders bite at the cherry.

I hope you are right that they have miraculously now been replaced by competent people, from top to bottom, who put shareholders interests first!

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Re: UK regulators considering allowing banks to restart paying dividends

#365001

Postby johnhemming » December 11th, 2020, 8:55 am

ReallyVeryFoolish wrote:Opposite views make a market.

Indeed they do. What I like to do is to buy unpopular stocks at a low price (which I think are undervalued) and sell them at a higher price.

If, however, everyone agreed with me then I would not be able to do this.

This year I kick myself for one investment decision which was to think that Covid would drive down the Iron Ore price

https://markets.businessinsider.com/com ... -ore-price

So I sold Ferrexpo.

However, otherwise I am reasonably content.

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Re: UK regulators considering allowing banks to restart paying dividends

#365004

Postby scrumpyjack » December 11th, 2020, 9:05 am

I agree that it can be very profitable to buy shares in companies where the SP is very depressed by what one thinks are temporary factors that they will get through and that the underlying business will recover to be strong and profitable in the long term. That has worked very very well for me with a number of multi baggers (BDEV, PSN, WTB, PRU, LGEN etc).
The problem for me with the banks is that I can’t really see them ever getting back to a position where they become seriously profitable and the SP is much higher than the net assets per share (ie the business is worth more than the money being deployed elsewhere). They may recover a lot more than where they are ATM, til the next crisis or political hatchet job.

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Re: UK regulators considering allowing banks to restart paying dividends

#365007

Postby Dod101 » December 11th, 2020, 9:10 am

scrumpyjack wrote:PPI cost banks £53 billion, Goodwin's mismanagement nearly bankrupted RBS. The catalogue of bank management incompetence is long and expensive! It has long been the tradition in UK banking that management bonuses take priority over shareholders bite at the cherry.

I hope you are right that they have miraculously now been replaced by competent people, from top to bottom, who put shareholders interests first!


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? Now they have over reacted the other way, but maybe that is the point, that none of the bank managements have exactly covered themselves in glory so what can they expect.

John Hemming is right in that investing can be basically trading, although many of us prefer a LTBH style. Holding banks used to lend themselves to that; I am not so sure that that is the case now.

Dod

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Re: UK regulators considering allowing banks to restart paying dividends

#365009

Postby CryptoPlankton » December 11th, 2020, 9:17 am

This exchange of views is all very interesting. If it gets reported as off topic and/or deemed so by a mod (preferably not), could I request it gets moved somewhere rather than simply being deleted?

FWIW, I am happy to retain my holdings in Lloyds and HSBC as I find it hard to believe they won't perform better in time.

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Re: UK regulators considering allowing banks to restart paying dividends

#365010

Postby dealtn » December 11th, 2020, 9:19 am

Dod101 wrote:
dealtn wrote:Personally I don't see the ability to pay a dividend as particularly important from a share valuation perspective, although preventing or limiting a Board of Directors from making such decisions isn't something I agree with. As I think I may have said on previous occasions this was discussed I suspect approval will be tied in to the "normal" stress testing banks have to go through annually, and such a process will secure agreement from both bank Boards and Regulators.


Many people do. In fact that was often the main reason for holding bank shares.

Dod


Agreed, but pricing is generally determined by a market dominated by institutions whose motives are often more attuned with the fungibility of money and total return. There will be some funds that are prevented from holding zero dividend payers by their income mandates, but my view is that valuation is determined by marginal buyers and sellers, and the importance of dividend seeking individuals is marginal at best.

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Re: UK regulators considering allowing banks to restart paying dividends

#365015

Postby Arborbridge » December 11th, 2020, 9:38 am

dealtn wrote:
Dod101 wrote:
dealtn wrote:Personally I don't see the ability to pay a dividend as particularly important from a share valuation perspective, although preventing or limiting a Board of Directors from making such decisions isn't something I agree with. As I think I may have said on previous occasions this was discussed I suspect approval will be tied in to the "normal" stress testing banks have to go through annually, and such a process will secure agreement from both bank Boards and Regulators.


Many people do. In fact that was often the main reason for holding bank shares.

Dod


Agreed, but pricing is generally determined by a market dominated by institutions whose motives are often more attuned with the fungibility of money and total return. There will be some funds that are prevented from holding zero dividend payers by their income mandates, but my view is that valuation is determined by marginal buyers and sellers, and the importance of dividend seeking individuals is marginal at best.


Strange, then, that the price ever reacts to news about the dividend.

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Re: UK regulators considering allowing banks to restart paying dividends

#365019

Postby dealtn » December 11th, 2020, 9:45 am

Arborbridge wrote:
dealtn wrote:
Dod101 wrote:
Many people do. In fact that was often the main reason for holding bank shares.

Dod


Agreed, but pricing is generally determined by a market dominated by institutions whose motives are often more attuned with the fungibility of money and total return. There will be some funds that are prevented from holding zero dividend payers by their income mandates, but my view is that valuation is determined by marginal buyers and sellers, and the importance of dividend seeking individuals is marginal at best.


Strange, then, that the price ever reacts to news about the dividend.


Not at all!

Prices react all the time to all sorts of news events, of which dividend information is one. But it is the news not the event.

If the news is that a dividend is cancelled but there is no underlying change in the business than all that has happened is a change in a cash flow event. There is no valuation news.

If there is a cancellation or change in a dividend policy because the company is performing better, or worse, than market expectations a change in the share price would be expected.

A regulator saying cash can't be paid out but must be retained, in itself isn't information that affects a valuation, nor would its reinstatement.

The vast majority of dividend announcements across all companies are accompanied by trading updates or other information regarding the company, and it is this that drives the movement in the share price.

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Re: UK regulators considering allowing banks to restart paying dividends

#365020

Postby bluedonkey » December 11th, 2020, 9:45 am

I contributed to this post - or its related one - hoping that someone would work out how much dividend HSBC could now pay within the guidelines laid down by the regulator. Turns out I have to do it myself!

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Re: UK regulators considering allowing banks to restart paying dividends

#365024

Postby johnhemming » December 11th, 2020, 9:48 am

Dod101 wrote:John Hemming is right in that investing can be basically trading, although many of us prefer a LTBH style.

I would not call my approach trading (although I do that some times). It is more like looking for investments where the market price is understated.

There can be trading opportunities in things like KIER or MARS where you cannot be certain that the business is a going concern. It is possible to trade profitability in those situations, but the risks are much greater. That is not really investment so much.

I will often buy what I think is undervalued and then sell some of it over time, but also keep some.

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Re: UK regulators considering allowing banks to restart paying dividends

#365028

Postby pyad » December 11th, 2020, 10:01 am

bluedonkey wrote:I contributed to this post - or its related one - hoping that someone would work out how much dividend HSBC could now pay within the guidelines laid down by the regulator. Turns out I have to do it myself!


Quite. The thread is contaminated by unapologetic non-HYPers with talk of short term trades in bank shares and the like. I'm not saying there's anything wrong with that, did it myself over the years countless times with value plays, just that this should have no place on the HYP boards. I'm not even sure why non-HYPers bother to look at HYP boards, though I have a good idea that it's because there is a wide following and thus they get attention whilst having no interest in the strategy.

I know it's a radical view but surely discussion should be limited to the HYP prospects of a share, which essentially means the long term income prospects from it. That doesn't mean every off topic message is disallowed, we need some latitude, but when non-HYP methods become the main point of a discussion, time to kick some butt I think.

On your main point, for what it's worth my source is forecasting a div of US 12.8¢ for 20, worth about 9.6p at the current FX rate. With the shares at 400p that's a forecast yield of just 2.4%. However for 21 the prediction is 26.3¢, worth about 19.8p for an FY of around 5.0%.

I'd caution though that any forecast divs for the banks at this stage are a lot more unreliable than in normal times.

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Re: UK regulators considering allowing banks to restart paying dividends

#365033

Postby Dod101 » December 11th, 2020, 10:16 am

dealtn wrote:
Arborbridge wrote:
dealtn wrote:
Agreed, but pricing is generally determined by a market dominated by institutions whose motives are often more attuned with the fungibility of money and total return. There will be some funds that are prevented from holding zero dividend payers by their income mandates, but my view is that valuation is determined by marginal buyers and sellers, and the importance of dividend seeking individuals is marginal at best.


Strange, then, that the price ever reacts to news about the dividend.


Not at all!

Prices react all the time to all sorts of news events, of which dividend information is one. But it is the news not the event.

If the news is that a dividend is cancelled but there is no underlying change in the business than all that has happened is a change in a cash flow event. There is no valuation news.

If there is a cancellation or change in a dividend policy because the company is performing better, or worse, than market expectations a change in the share price would be expected.

A regulator saying cash can't be paid out but must be retained, in itself isn't information that affects a valuation, nor would its reinstatement.

The vast majority of dividend announcements across all companies are accompanied by trading updates or other information regarding the company, and it is this that drives the movement in the share price.


I suspect that this exchange is not going to get us far but the fact is that it depends on what you mean by ' a valuation'. It is in any case subjective at best but some would say that the value is whatever the market assigns to it, ie the share price, and that is often affected by a dividend announcement. I suggest that you are being too 'purist' and not looking at the valuation for the point of view of the average shareholder.

Dod

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Re: UK regulators considering allowing banks to restart paying dividends

#365038

Postby Dod101 » December 11th, 2020, 10:22 am

Good Heavens. We do not need pyad or anyone else trying to set further limits on what may be posted here or who may do the posting. It is quite restricted enough as it is.

I will make no attempt at forecasting what dividend HSBC or any other bank my declare or recommend when their final results for 2020 are announced in the new year but certainly the numbers mentioned by pyad are thoroughly depressing and I think would cause considerable disappointment in the market. Didn't know that pyad was into forecasting. What happened to Strategic Ignorance?

Dod


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