The Lemon Fool

UK regulators are considering plans to allow banks to start paying dividends again next year, The Times newspaper reported on Monday.

The Bank of England (BoE) and commercial banks are “bartering” a deal to allow banks to make shareholder payouts as long as their loss-absorbing capital buffers are strong and they continue to extend credit to the real economy, the newspaper said.

https://uk.reuters.com/article/uk-brita ... the-times-
idUKKBN27A12I

I don't hold any banks in my HYP, but I know some here do, so this should be of interest to them. Should banks be able to pay dividends again, I might just toy with bringing them back on board......maybe?

Ian.

I hope the link to this item works for you.

I've put this item on the banking investors board too, in case it's deemed ot here.

btw, I hunted for this info due to seeing a comment about it on Bloomberg just now.

I posted an item re this on HYP Practical here;

viewtopic.php?p=364840#p364840

I think it's actually moved beyond 'considering' today -

Bank of England relaxes COVID curbs on bank dividends -

LONDON (Reuters) - Britain’s banks can resume paying some dividends and bonuses as lenders appear well capitalised and resilient to fallout from the coronavirus pandemic, the Bank of England said on Thursday

“The Prudential Regulation Authority judges that an extension of the exceptional and precautionary action taken in March is not necessary and that there is scope for banks to recommence some distributions should their boards choose to do so,” the BoE said in a statement.

https://uk.reuters.com/article/uk-britain-boe-banks/bank-of-england-relaxes-covid-curbs-on-bank-dividends-idUKKBN28K2CP

I think your earlier quote and link might have been from the October 25th news release -

https://uk.reuters.com/article/uk-britain-banks-dividend/uk-regulators-considering-allowing-banks-to-restart-paying-dividends-the-times-idUKKBN27A12I

Cheers,

Itsallaguess

Thanks for your input, and guidance, Itsallaguess. I appreciate it.

Either way, the topic is still a worthy one hereabouts methinks.

Ian.

Hopefully this will allow HSBC to resume dividends. There are some calculations set out by the regulator in this piece:
https://www.bankofengland.co.uk/prudent ... e-uk-banks

bluedonkey wrote:Hopefully this will allow HSBC to resume dividends. There are some calculations set out by the regulator in this piece:
https://www.bankofengland.co.uk/prudent ... e-uk-banks

Strange that it has done nothing for the HSBC share price. Maybe because it is not really 'news'. It depends where they set their dividends and whether the PRA will want any say in their level.

Dod

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.

RVF

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

Ian.

Oh, I have one of them too....it's called " my HYP"...

I hold both HSBA and Lloyds and capital has been really hit. Hopefully the resumed dividends will start to repair the damage over a long term. I do feel as though I'm paying me my own money back....slowly. It has not been a good year divi-wise, maybe it will all change by this time next year.

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.

RVF

You may have heard of the Dogs of the Dow investment technique - this is the Flops of the FTSE.

Arb.

It will be interesting to see the response to this news in Asia with respect to HSBC/STAN.

https://www.telegraph.co.uk/business/20 ... dividends/

"The Bank of England’s supervisory arm said on Thursday that banks could repay “appropriate” dividends after concludeing (sic) that bank capital positions were strong enough to support the economy despite the harsh economic circumstances and “considerable uncertainty” surrounding Brexit. "

''The Prudential Regulation Authority said it would ensure that any dividend proposals would not put banks’ ability to support households or businesses at risk.''

Bank of England PRA Statement.

https://www.bankofengland.co.uk/prudent ... e-uk-banks

I think what would move a price is the announcement of a dividend. It is not just a question of paying a dividend, but also how much. Today's movements in UK banks were probably no deal skittishness. (or even preparation)

Arborbridge wrote:
You may have heard of the Dogs of the Dow investment technique - this is the Flops of the FTSE.

Arb.

I suppose for us it’d be ‘hopeless of my HYP’ lol

Ian.

According to the FT:

The regulator set a dividend limit of 25 per cent of a bank’s cumulative profits over the previous two years or 0.2 per cent of its risk-weighted assets — whichever is the higher.

Assuming 'the previous two years' is 2019 and 2020, then Standard Charted earned 56 cents per share in 2019 and is forecast to earn 42 cents per share in 2020, or 98 cents on a cumulative basis, so I assume the maximum dividend they could declare would be 24.5 cents per share.

Risk weighted assets at the end of June 2020 were $262 billion or so, so about £0.5 billion would be a maximum dividend of around 16 cents a share given the number of shares in issue.

The small print might reveal they are using very a different measure of either profit or risk weighted assets, however you could do work on various banks to see what their maximum dividend permitted would be. And then, I'd assume they will pay out substantially less to be careful!

Best wishes

Mark.

More detail on the FT website, for those with access:

https://www.ft.com/content/8d9e5eae-83d ... 16d6af32a9

MDW1954

idpickering wrote:I posted an item re this on HYP Practical here;

viewtopic.php?p=364840#p364840

I suspect there is nothing new here other than the regulator review is approaching its end. Similar stories about Banks "bartering" with the PRA were in the media through October and November (and discussed on this Board).

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.

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

Dod

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

...but better than extirpating dividends.

Best wishes


Mark.

Note that you have to deduct any dividend already paid, eg 2019 interims

scrumpyjack wrote:Note that you have to deduct any dividend already paid, eg 2019 interims

Standard Chartered paid a 7 cents interim dividend in October 2019. The final would have been due in May 2020. Taking the lowest of my two estimates - 16 cents - then we're down to 9 cents a share as a maximum and, I suspect, they would want a buffer to be on the safe side.

Early in 2019, they had been talking of, potentially, doubling dividends to c. 40 cents a share by 2021 in a pre-COVID world. I suspect shareholders would be lucky to get that by 2023-24, however Asian markets are recovering much better.

Best wishes


Mark.

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