HSBC, StanChart under pressure after UK banks axe dividends
Published on 01 Apr 2020. | Source: thestar.com.my
U.K. banks trading in Hong Kong plunged after they scrapped dividends and buybacks at the urging of regulators to steel capital levels against the deepening fallout from the coronavirus outbreak.
HSBC Holdings Plc and Standard Chartered Plc tumbled after they and Royal Bank of Scotland Group Plc, Barclays Plc and Lloyds Banking Group Plc canceled outstanding dividends and buybacks and said there would be no payments in 2020.
The regulatory intervention risks further underperformance by U.K. banks, relative to both domestic insurers and global banks, Citigroup Inc. analysts wrote in a note.
Banks are under pressure globally from volatile markets and slumping growth, but have also been at the front-end of massive support from central banks and regulators, including relief on some capital buffers and more time to tackle soured loans.
The U.K.’s five biggest banks had planned to pay out 7.5 billion pounds ($9.3 billion) in dividends over the next two months. Barclays was due to dole out more than 1 billion pounds on Friday.
"It looks structurally bearish for the sector, namely: higher cost of equity, increased regulatory uncertainty, weaker investment cases in the event of future capital raises,” Jefferies analyst Joseph Dickerson wrote in a note, adding that HSBC is likely most at risk.
HSBC’s shares plunged 9.4% to HK$40.00 as of 2:17 p.m. in Hong Kong, bringing this year’s decline to 34%. Standard Chartered Plc tumbled 6.9%.
HSBC said it would cancel an interim dividend slated to be paid this month and also make no payouts or do any buybacks until at least the end of the year.
In its statement on Tuesday, HSBC said that "we expect reported revenues to be impacted in insurance manufacturing, and credit and funding valuation adjustments in Global Banking & Markets, alongside higher expected credit losses.”
HSBC, which generated half its 2019 revenue in Asia, has earlier said in the most extreme scenario, in which the virus continues into the second half of 2020, it could see $600 million in additional loan losses.
"Group performance has been resilient in the first quarter in difficult economic conditions and, so far, credit performance has held up well,” HSBC said on Tuesday.
The U.K.’s Prudential Regulation Authority also said that it "expects banks not to pay any cash bonuses to senior staff, including all material risk takers.” The company statements didn’t mention bonuses.
Standard Chartered said any decision on a final dividend for 2020 will take into account the financial performance of the group for the full year and the medium-term outlook at that time. - Bloomberg
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