People
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Dividend shock hits bank stocks
HSBC, StanChart scrap payouts after UK pressure
Asian investors reacted with horror to the
forced suspension of dividend payments
by HSBC and STANDARD CHARTERED last week,
sending shares in the two UK-headquartered
banks plunging to historic lows.
The two banks, which make most of their
PROlTSûINû!SIA ûAREûAMONGûSIXû5+ûBANKSû
that have pledged to suspend payments to
shareholders at the request of the Prudential
Regulation Authority in order to conserve
capital amid the coronavirus pandemic.
HSBC was hardest hit by the news, as it
prides itself on its ability to pay dividends,
and investors, especially in Hong Kong, rely
on its reliable income. The bank made 55% of
ITSûPROlTûINû(ONGû+ONGûLASTûYEAR ûANDûABOUTû
40% of its shareholders are retail investors in
the territory.
HSBC’s Hong Kong shares plummeted 9.5%
on Wednesday after it said it had cancelled its
fourth interim dividend for 2019 of US$0.
per ordinary share, which was scheduled to
be paid on April 14. It said it would not make
any quarterly or interim dividend payments
this year.
The bank had said in February that it was
suspending share buybacks this year and
in 2021 as part of its restructuring, which
has since also been shelved because of the
pandemic. Its latest statement reiterated the
pledge not to buy back any stock this year.
4HEûSTOCKûSLIDûFURTHERûTOûlNISHûTHEûWEEKû
at HK$37.90 (US$4.89), its lowest since 2009,
with the UK-listed stock on track for a similar
outcome.
StanChart, which listed in Hong Kong in
2002 and is less actively traded than its rival,slid 11.3% over three days to a record low of
HK$38.35, after saying on Wednesday that
ITûWOULDûNOTûPAYûITSûlNALûDIVIDENDûFORûû
of US$0.20 per ordinary share and would
suspend share buybacks. The London-traded
shares shed 10% to a four-year low.
Banks globally are facing heavy pressure
to limit payouts to shareholders to help fund
the response to the coronavirus pandemic.
UK lenders were given little choice on
dividends by the Bank of England’s PRA,
which threatened to take supervisory action
against them if they did not.
In the European Union, most banks
have now suspended dividends after the
European Banking Authority asked them
“to refrain from dividends distribution or
share buybacks which result in a capital
distribution outside the banking system”.
UBS and Credit Suisse, on the other hand,
both said they plan to press ahead with their
2019 dividends despite their home regulator
urging caution over payouts.
The eight largest US banks – JP Morgan,
Bank of America, Citigroup, Goldman Sachs,
Morgan Stanley, Wells Fargo, Bank of New
York Mellon and State Street – last month
suspended their share buybacks until at least
the end of June, but none so far have cut
dividends despite mounting pressure from
lawmakers and former regulators.
HSBC and StanChart have so far resisted
calls to withhold bonuses, indicating that will
be a decision made at the end of the year.
4HEû02!ûSAIDûITûEXPECTEDûBANKSûNOTûTOûPAYû
any cash bonuses to “senior staff, including
all material risk takers”.MISSED CALL
New Zealand’s central bank on Thursday
also ordered banks to stop paying dividends
or redeeming capital notes, the latter move
THOUGHTûTOûBEûTHEûlRSTûDEMANDûOFûITSûKINDû
anywhere.
In Australia, Prime Minister Scott
Morrison said on Friday that local
regulators do not see the merits of
restricting returns to shareholders
currently, but analysts said that a spike
in coronavirus-related credit losses could
prompt banks to cut dividends anyway.
CBA, NAB and Westpac reiterated
that they remained well-capitalised and
that the Reserve Bank of New Zealand’s
announcement was unlikely to have a
MAJORûIMPACTûONûEXISTINGûCAPITALûRATIOSû
Australia’s big four banks dominate the
Kiwi banking market through their local
subsidiaries.
ANZ said that its New Zealand subsidiary,
ANZ Bank New Zealand, would not call its
NZ$500m (US$295.3m) 7.2% Additional Tier
1 perpetual securities on May 25 following
the RBNZ’s announcement.
Analysts at Citigroup estimate that
Australia’s big four will cut dividends by up
to 18% to preserve capital as Australia now
TEETERSûONûTHEûEDGEûOFûITSûlRSTûRECESSIONûINû
29 years.
Shares in ANZ, CBA, NAB and Westpac
were down 5.3%, 3.8%, 5.6% and 4.3%,
RESPECTIVELY ûONû4HURSDAYû!.:ûlNISHEDûTHEû
week 2.1% higher. CBA gained 4.3%, NAB
3.3% and Westpac 3.8%.
THOMAS BLOTT14 International Financing Review Asia April 4 2020TOP STORY REGULATIONWho’s moving where...
CREDIT SUISSE has
promoted Angelo
Scasserra to co-
head of investment
banking and capital
markets for Australia.
He is a replacement
for Mark Carlile, who
has been appointed
vice chairman for
IBCM in Australia.
The other co-head,
James Disney,
remains in his role.Scasserra has been
with Credit Suisse for
over 15 years and has
led the real estate
coverage teams in
IBCM for South-
East Asia and most
recently Australia.
A resources banker by
background, Carlile
has been with Credit
Suisse for almost a
decade. Former UBS Asia
Pacific president and
chief executive officer,
Chi-Won Yoon, has
joined Hong Kong-
based cryptocurrency
and blockchain
company DIGINEX as
Asia chairman.
Yoon joined UBS in
1997 and established
its equity derivatives
business in Asia. He
then worked in theinvestment bank as
head of securities for
Asia Pacific before
becoming regional
CEO in 2009.
He left the Swiss
investment bank in
2015 with a view to
taking a sabbatical at
the time.
He previously worked
at Lehman Brothers
and Merrill Lynch.B 3 HRSOHDQG 0 DUNHWVLQGG