The Bank of England Prudential Regulatory Authority (PRA) has ordered major UK lenders to scrap £8bn worth of dividends in response to the coronavirus (Covid-19) crisis.
In their respective press releases, top UK banks like HSBC, Santander, Standard Chartered, Barclays, RBS and Lloyds confirmed that they are halting the dividend payouts and share buybacks for 2019.
The banks will not make any quarterly or interim dividend payments until the end of 2020.
To prepare the banks for a potential recession, the PRA has also urged the lenders to not send out cash bonuses to its executives.
In a letter sent to each bank separately, PRA boss Sam Woods said: “The PRA welcomes the consideration given by you and your firm to suspend dividends and buybacks on ordinary shares until the end of 2020.
“I am also writing to ask you to cancel payments of any outstanding 2019 dividends.
“The PRA also expects banks not to pay any cash bonuses to senior staff, including all material risk-takers.”
According to media reports, HSBC has a dividend yield of 9%, Standard Chartered 4.9%, Barclays 9.6%, RBS 4.4%, and Lloyds 10.5%.
In its release, HSBC bank said: “HSBC has a strong capital, funding and liquidity position; however, there are significant uncertainties in assessing the time period of the pandemic and its impact.
“The Board has therefore cancelled the fourth interim dividend of $0.21 per ordinary share, which was scheduled to be paid on Tuesday, 14 April 2020.”
Responding to the letter, Santander stated: “The board has agreed to consolidate any dividend from 2020 earnings into a single final proposed dividend, to be submitted to the Annual General Meeting (AGM) for approval in 2021.
“This means there will not be an interim dividend payment in November 2020.
Standard Chartered suspended its final dividend payment of 20 cents per ordinary share for 2019 and the buy-back programme announced on 28 February 2020.
The bank said: “The board fully recognises the importance of dividends to the Group’s owners.
“However, suspending shareholder distributions at this time will allow the Group to maximise its support for individuals, businesses and the communities.”
Barclays’ shareholders were about to receive over $1bn. However, the bank scrapped the dividend payments in response to the request from the PRA.
Barclays chairman Nigel Higgins said: “These are difficult decisions, not least in terms of the immediate impact they will have on shareholders.
“The bank has a strong capital base, but we think it is right and prudent, for the many businesses and people that we support, to take these steps now, and ensure that Barclays is well placed to continue doing what we can to help through this crisis.”
Royal Bank of Scotland (RBS) has scrapped a payout worth £968m which was due on 4 May 2020.
RBS CEO Alison Rose said: “As we continue to build a purpose-led bank we are committed to balancing the needs of all our stakeholders.
“The Board remains committed to capital returns, will continue to review the situation and will look to resume distributions to ordinary shareholders in due course.”
Lloyds Banking Group
Lloyds Bank has already paid the interim dividends to its executives on 13 September 2019.
However, the bank has agreed to scrap the final 2019 dividend until the end of 2020.
On its website, the bank said: “In response to a request from the Prudential Regulatory Authority and to preserve additional capital for use in serving our clients, the board has agreed to cancel payment of the final 2019 dividend in relation to ordinary shares.”