Banks get biffed again despite support on dividends

LONG suffering investors in British banks who thought a show of support from watchdogs on dividend payments might breath life into the shares now know better.

Last night the Prudential Regulation Authority, which banned bank divis back in March, said there is now “scope for banks to recommence some distributions” – almost a green light to boards.

This morning the Bank of England said in its latest financial stability report said the banks are rock solid – their balance sheets are strong enough to absorb Covid losses of £200 billion, an amount that would require “incredibly severe” shocks to the economy.

The City response? Barclays shares got marked down 7p to 135p, HSBC down 3p to 400p, Lloyds was off 2p at 34p and NatWest – in which the government has a 60% stake – lost 8p to 153p.

The nods of approval from the regulators were overshadowed by Brexit noise and the feeling that the PRA might change its mind before long.

Analysts think banks will tentatively sign off on small divis to be paid early next year, before heading back to donut land – a big fat zero – come the Spring.

Adding to that uncertainty is the lack of news on the government’s plans for NatWest. The City grants that the government has other things on its mind, but would like to know when it thinks it might be possible to sell down its stake. That now looks like being the second half of next year or later, leaving a downward push on shares that are part of many thousands of saving schemes.

The wide uncertainty on Brexit pushed the FTSE 100 down 44 points to 6555. Aside from the banks the biggest fallers were JD Sports, down 28p at 758p and BA owner IAG, off 5p at 157p.

Susannah Streeter at Hargreaves Lansdown says: “With the UK now looking like its hurtling towards a no-deal Brexit, investors should adopt the brace position for swings in sterling and shares in domestic focused companies.”