UK banks scrap dividends on coronavirus fears, pressure on bonuses

LONDON (Reuters) – Britain’s top banks said on Tuesday they would suspend dividend payments after pressure from the regulator, saving their capital as a buffer against expected losses from the economic fallout from the coronavirus.

Barclays (BARC.L), HSBC (HSBA.L), Lloyds Banking Group (LLOY.L), Royal Bank of Scotland (RBS.L), Standard Chartered (STAN.L) and the British arm of Spain’s Santander (SAN.MC) all halted payouts.

The lenders had been due to pay out over 8 billion pounds ($9.93 billion) between them in 2019 dividends, with HSBC the biggest payer at $4.2 billion.

The move came in response to a request from the Prudential Regulatory Authority (PRA), which also asked banks and insurers not to pay senior staff bonuses this year.

The lenders said they would not pay interim dividends for 2020 and scrapped planned 2019 payouts, but held off announcing changes to their executive pay policies.

The PRA said banks entered the epidemic, which has put Britain into lockdown, with strong capital positions, enough to withstand a severe UK and global recession.

“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,” Barclays chairman Nigel Higgins said.

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.

FOLLOWING ECB’S LEAD

The statements from British lenders come after the European Central Bank (ECB) last week asked euro zone lenders to skip 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 (CRDI.MI), and Societe Generale (SOGN.PA) have already announced they will hold off paying 2019 dividends for now.

However there are some hold outs. Swiss banking giants UBS (UBSG.S) and Credit Suisse (CSGN.S) have both said they plan to press ahead with 2019 dividends despite their home regulator urging caution over payouts.

The move to scrap 2019 shareholder distributions is expected to free up capital that banks can instead lend to businesses and consumers rocked by the Covid-19 pandemic.

But some analysts believe cancelling dividends could actually harm the supply of credit to the real economy.

“We note that euro area bank market capitalization fell on 30 March by the same as the 30 billion euros ‘saved’ by its dividend ban on Friday 27 March,” analysts at Bank of America Merrill Lynch said in a note to clients, referring to the ECB’s move.

The European Union’s banking watchdog said earlier on Tuesday that banks should be “conservative” in how they award bonuses to preserve capital and keep lending during the coronavirus pandemic.

However it stopped short of calling on banks to stop bonuses altogether.

Italy’s UniCredit and Spain’s BBVA have both said this week that their top management will waive their 2020 bonuses.

Standard Chartered signaled in a memo on Monday that the bank would likely cut its 2020 executive payouts.

PRA Chief Executive Sam Woods also wrote to heads of insurers, saying they should pay “close attention” to the need to protect policyholders and maintain safety and soundness when considering bonuses or dividends.

HSBC signaled a gloomy first quarter earnings season ahead for British banks, warning in its statement that it would see bad loans rising and revenues falling as the economic impact of the pandemic hits.

($1 = 0.8059 pounds)

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Coronavirus: Chef Luca di Nicola, 19, was ‘very healthy’

A 19-year-old who died after testing positive for COVID-19 did not have underlying health conditions, the NHS has said.

Luca di Nicola, 19, an assistant chef from Italy, died in London after testing positive for the coronavirus.

It is understood Luca was “very healthy”, and according to Italian newspaper La Repubblica, he was from Nereto in central Italy.

He was taken by ambulance to the North Middlesex Hospital in Enfield, north London last Tuesday – he died 30 minutes later, from apparent fulminant pneumonia.

His father, Mirko, has told the Italian publication that his son had contracted the virus, and that the family received an email from British medical authorities saying a post-mortem swab had confirmed that.

It is believed the coroner has not officially confirmed it.

But other members of the di Nicola family are reported to have said they received an email from the London hospital on Monday night, and then a phone call from the coroner.

Luca’s brother, Davide di Nicola, has paid tribute to his sibling on his Instagram, saying “I love you brother”.

He said: “We both grew and matured and you, surely more mature than me, had the courage and the desire to bring new goals.

“Cooking, your greatest passion would have taken you far.

“This Carnival photo represents one of the few hangovers taken together, I drank a little to tell the truth but I had a lot of fun staring at you and holding you.

“I would have liked to spend so many other days and evenings with you and I swear that I will take you with me every day, on every occasion, every time I take the field.

“I will try to express some of your wishes and fulfill part of your dreams, it will be like doing it together also because you are here with me and you will always be. I send you a hug up there, to that starred restaurant .. I love you my brother!”

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