Big blow for major stakeholders as dividend payments are halted due to global pandemic

Major banks that include Barclays, Royal Bank of Scotland and the British arm of Spain’s Santander have suspended dividend payments, saving their capital as security against expected losses from the economic fallout from the coronavirus epidemic.

Barclays and RBS said they would not pay any dividend in 2020 and also scrapped planned 2019 payouts in response to a request from the Prudential Regulatory Authority.

On Monday, Barclays shares fell by another 7% as the bank came under fresh pressure to ditch a 6p-a-share, £1 billion dividend payment due on Friday.

Barclays chairman Nigel Higgins, said: “The bank has a strong capital base, but we think it is right and prudent, for the many businesses and people that we support, to take these steps now."

More of Britain’s top lenders were expected to make announcements on Tuesday evening following the request from the regulator.

Bank of England governor Andrew Bailey has already made it plain he expects banks to make protecting customers a priority. Other voices have since said they think dividends are presently irresponsible.

What is a dividend?

A dividend is the distribution of a portion of the company's earnings, decided and managed by the company’s board of directors, and paid to a class of its shareholders.

Banks pay out dividends as a means of rewarding shareholders and disposing of excess profits, but they have the option to retain the earnings instead to preserve their capital levels.

A large sum of money was due to be paid out to investors in the coming weeks - but both small shareholders and big city investors face disappointment as the coronavirus pandemic wreaks havoc among UK businesses and lenders.

The statements from British lenders came after the European Central Bank (ECB) last week asked euro zone lenders to postpone dividend payments and share buybacks until October at the earliest, and use their profits to support the economy.

Several of Europe’s largest lenders, including UniCredit , and Societe Generale have already announced they will hold off paying 2019 dividends for now.

Swiss banking giants UBS and Credit Suisse have both said they still plan to press ahead with 2019 dividends despite skepticism from their home regulator who has discouraged payouts.

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