Investors cry foul as banks ax dividends

Thousands of institutional and retail investors of HSBC (0005) and Standard Chartered (2888) cried foul over the lenders' decision to ax dividend payments and suspend share buybacks at the request of the Bank of England.

HSBC shares plunged 9.5 percent to HK$39.95 yesterday, a level not seen since March 2009. Standard Chartered dropped 7.6 percent to HK$39.9.

What may comfort investors a little is that the Hong Kong Monetary Authority said it would not ask banks to do the same things as Hong Kong's banking sector still has ample capital.

"People buy HSBC mainly because of the high dividend, but now they will suspend paying dividends for 2020, I think it will have a huge impact on its investment outlook," said Kenny Wen Kit, wealth management strategist of Everbright Sun Hung Kai.

Wen estimates HSBC's share price will stay at around HK$40. "If the impact lasts for longer than expected and they need to issue a rights issue, then this will be another negative factor for HSBC, and the stock price may have further downside risks," he said.

HSBC canceled the fourth interim dividend of US$0.21 (HK$1.64) per share for 2019, which was scheduled to be paid on April 14.

It will make no quarterly or interim dividend payments, or any share buybacks, until the end of the year, but will review the dividend policy for 2020 once the full impact of the pandemic is better understood, and economic forecasts for global growth in future years are clearer.

Chief financial officer Ewen Stevenson estimates that HSBC can save around US$9 billion and the Common Equity Tier 1 ratio - a measure of the bank's capital sufficiency - will improve by nearly 1 percentage point by doing so. He said HSBC has no equity financing plans.

Legislator Christopher Cheung Wah-fung worried about insider trading and that scrapping the dividends may disadvantage minority shareholders.

Cheung said he had received complaints from investors about HSBC's decision.

HSBC cancelled the final dividend after the ex-dividend date on February 27, when share prices usually fall.

Investors receive the next upcoming dividend payment only if they buy the stock before the ex-dividend date.

Institutional and corporate investors also suffered. Ping An Insurance (2318) and asset manager BlackRock, each holding around 7 percent of HSBC, are estimated to suffer a loss of dividends worth about HK$4.5 billion in total.

Stock commentator Agnes Wu Mang-ching lamented HSBC was making a joke on April Fool's Day. She shed tears during a live television broadcast when HSBC closed at HK$33 in March 2009.

HSBC also warned that the Covid-19 outbreak will hurt its reported revenue and lead to higher expected credit losses.

Meanwhile, Standard Chartered withdrew the board recommendation to pay a final dividend of 20 US cents per share for 2019, which was meant to be paid on May 14.

Whether to pay a final dividend in 2020 depends on the full-year financial performance and the medium-term outlook at that time, Standard Chartered said.

Hang Seng Bank (0011) and BOC Hong Kong (2388) said they had no plans to change their dividend payment policies.

Editorial: HSBC 's pants down with dividends gone