Bank of Eng­land set to sup­port banks' div­i­dend plans

The Pak Banker - - FRONT PAGE -

LON­DON: The Bank of Eng­land is ex­pected to ap­prove banks' div­i­dend plans this week, as the re­port­ing sea­son gets un­der way. Of­fi­cials re­view the pay­outs to make sure banks are not giv­ing out funds that they need to re­tain to main­tain their fi­nan­cial strength. But de­spite the spread of vi­o­lent moves in share prices from Euro­pean lenders and into Bri­tish fi­nan­cial in­sti­tu­tions, of­fi­cials are ex­pected to ap­prove the div­i­dend pay­outs.

It will be seen as a vote of con­fi­dence in the in­dus­try, show­ing that the Bank of Eng­land still sup­ports state­ments it made in De­cem­ber and Jan­uary that the sec­tor is now strong and sta­ble.

The Bank's gov­er­nor, Mark Car­ney, de­clared the banks safe when he un­veiled the re­sults of stress tests in De­cem­ber. Those tests con­cluded that banks are now strong enough to cope with a ma­jor re­ces­sion and keep lend­ing through­out, be­cause they have built up cap­i­tal buf­fers to pro­tect them­selves should they suf­fer losses. This week's de­ci­sion on div­i­dends will be the first "acid test" of that con­fi­dent state­ment, a bank­ing source said.

An­a­lysts are also con­fi­dent about the fi­nan­cial strength of the UK's ma­jor lenders. Ian Gor­don at In­vestec pre­dicted that Bar­clays will pay a full-year div­i­dend of 6.5p, Lloyds will pay 2.25p and HSBC will pay 51 cents.

Royal Bank of Scot­land and Stan­dard Char­tered have both al­ready said they will not pay any­thing. RBS hopes to be able to pay a div­i­dend in 2017, as prof­its re­turn and it pays the govern­ment for the right to pay a div­i­dend, a re­quire­ment im­posed un­der the terms of the bank's bailout in 2008 and 2009.

Mr Gor­don said: "All of the banks are ad­e­quately or even well cap­i­talised. Bar­clays is fac­ing the great­est scru­tiny but even it is com­fort­able in my view. "It has some way to go build­ing cap­i­tal in the next few years, when other banks have al­ready ar­rived at or near to the end point. "Bar­clays needs to un­veil a raft of new mea­sures, which it will do on March 1, most likely fo­cused on cost re­duc­tion and risk-weighted as­set re­duc­tion ini­tia­tives cen­tred on its in­vest­ment bank."

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