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01 April 2020

Falling in Line: Banks Scrap Dividend Payments

Saul Fulda, Investment Analyst, Redmayne Bentley
 
“Following an increasing furore over the past few days, Britain’s biggest banks caved to pressure from the Prudential Regulation Authority (PRA) and suspended their upcoming dividend payments.
 
Totalling close to £8bn between the five largest banks – Barclays, HSBC, Lloyds, RBS and Standard Chartered – the halting of dividend payments is a sensible decision and puts the banks in line with the trend spreading throughout global equity markets.
 
Companies understand the importance of having a robust balance sheet and are keen to build a cash buffer in order to survive the current market turmoil. Yes, this isn’t a self-made global recession, but Britain’s banks are not immune.
 
The banks have been criticised for digging their heels in and eventually bowing to pressure from the PRA, yet they are acutely aware of their duty to shareholders, many of whom are relying on this income in what is becoming a difficult time for households.
 
This affair has highlighted the tricky balance between aligning shareholder interests and maintaining stability in the financial system and credit markets. Lessons were certainly learnt from the financial crisis of 2008/09.”
Falling in Line: Banks Scrap Dividend Payments
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