The British banking regulator pressed firms, including HSBC Holdings PLC, to scrap dividends and cash payouts for its top staff as the COVID-19 pandemic upends the industry.
HSBC and Standard Chartered PLC shares tumbled again yesterday after they and Royal Bank of Scotland Group PLC, Barclays PLC and Lloyds Banking Group PLC on Tuesday canceled outstanding dividends and buybacks, and said there would be no payments this year.
The move came after the UK’s Prudential Regulation Authority on Tuesday wrote to lenders asking them to cancel payments, adding that it “expects banks not to pay any cash bonuses to senior staff, including all material risk takers.”
Photo: Bloomberg
The company statements on Tuesday did not mention bonuses.
The UK push to cut discretionary awards for senior managers follows a similar stance from the European Banking Authority (EBA).
In its strongest warning to date, the EBA also said banks should set pay and especially bonuses at a “conservative level” during the crisis.
Photo: Reuters
Firms should also consider deferring awards for a longer period and paying staff in shares, it said.
Banks are under pressure globally from volatile markets and slumping growth, but have also been at the front end of massive support from central banks and regulators, including relief on some capital buffers and more time to tackle soured loans.
The UK’s five biggest banks had planned to pay out ￡7.5 billion (US$9.3 billion) in dividends over the next two months.
Barclays was due to dole out more than ￡1 billion tomorrow.
“It looks structurally bearish for the sector, namely: higher cost of equity, increased regulatory uncertainty, weaker investment cases in the event of future capital raises,” Jefferies Group LLC analyst Joseph Dickerson wrote in a note, adding that HSBC is likely most at risk.
HSBC’s shares plunged 10 percent in London trading on Tuesday and were down 8.4 percent at noon yesterday, while Standard Chartered tumbled 7 percent.
HSBC said it would cancel an interim dividend slated to be paid this month and also make no payouts or buybacks until at least the end of the year.
In its statement, HSBC said that “we expect reported revenues to be impacted in insurance manufacturing, and credit and funding valuation adjustments in Global Banking & Markets, alongside higher expected credit losses.”
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