01 April 2020
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HSBC saw its shares plummet by 9.5% in morning trading in Hong Kong this morning following the lender's announcement it was scrapping its dividend payout and warning revenue losses will be impacted from the covid-19 outbreak.
The Hang Seng also saw Standard Chartered, another UK-headquartered international bank, shares fall by 5.2% this morning. HSBC's shares fell to HK$40.9, bringing the total fall this year to 33%.
The UK Bank of England's Prudential Regulation Authority has written to both banks requesting them to suspend all dividends.
HSBC's board said the bank willmake "no quarterly or interim dividend payments or accruals in respect of ordinary shares, or undertake any share buy-backs in respect of ordinary shares" before the end of 2020.
Standard Chartered said in a statemtent it "has decided after careful consideration to withdraw the recommendation to pay a final dividend for 2019 of 20 cents per ordinary share and to suspend the buy-back programme announced on 28 February 2020. No interim dividend on ordinary shares will be accrued, recommended or paid in 2020."
In February HSBC published its full-year results for 2019 showing a 33% fall in profits YoY. The bank posted a net profit of $5.97bn, down from $12.61bn in 2018.
UK banks cut dividends
The banks' decision follows all other UK banks' moves to halt dividends following recommendations from the BoE. Commenting on the £7.5bn of dividend cuts by the UK's largest banks, Kevin Doran, chief investment officer at AJ Bell, said: "Now would be the ideal time to repay the British public for the bailout the banks received during the Financial Crisis by writing of debt repayments for a period of time for those most affected by the covid-19 crisis.
"The gross revenue generated by the UK banking sector from interest paid on debt by consumers and companies is around £28bn per quarter on a total loan balance of around £1.9trn."
Doran added, "£7.5bn would go a long way to providing debt relief for the individuals and businesses that will be unable to make interest payments over the next three to six months, cancellation of share buybacks and banker bonuses would go even further."
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