HSBC, Standard Chartered dividends in focus as banks seen delivering stronger half-year results
- HSBC, Standard Chartered resumed paying dividends this year after suspending payouts in 2020 to preserve capital during the pandemic
- Prudential Regulation Authority in July discarded ‘temporary guardrails’ put in place after banks resumed dividend payouts
Investors will be watching this week to see whether HSBC and Standard Chartered resume paying interim dividends as the lenders prepare to report their first-half results against the backdrop of a sharp economic recovery in Hong Kong, their single biggest market.
Other big banks with operations in the city that are expected to report their results this week include Hang Seng Bank, which is majority owned by HSBC; Singapore’s DBS Group Holdings[ and Oversea-Chinese Banking Corp, the parent of OCBC Wing Hang.
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“Their dividend restrictions have been lifted by BoE, paving the way for an interim dividend,” Citi analyst Yafei Tian said in a research note. “Domestic HK banks [also] could be allowed to increase dividend payout ratios given robust asset quality and strong capital.”
HSBC and Standard Chartered are both based in London, but generate much of their revenue in Asia.
On Wednesday, British rival Barclays said it would pay an interim dividend of 2 pence a share and undertake a £500 million (US$694 million) stock buy-back programme. Lloyds Banking Group and NatWest Group also announced that they would resume paying interim dividends.
Standard Chartered is expected to pay a full-year dividend of 19.5 US cents a share for 2021 after making a payout of 9 US cents a share for full-year 2020 in May, according to a consensus estimate of 15 analysts compiled by the bank.
At the same time, lenders in the city are navigating a period of historically low interest rates as central banks try to restart economies whacked by the coronavirus pandemic.
In June, the US Federal Reserve moved forward its timeline for rate hikes, saying they could come as soon as 2023. Rising inflationary pressure also has prompted some investors to fret that the Fed and other central banks could bring forward rate increases sooner than that projection.
Apart from the dividend news, another area investors will be monitoring is whether banks in Hong Kong are able to release additional billions of dollars of credit reserves set aside last year for potential soured loans as the pandemic raged.
An increase in credit losses at Hong Kong banks in 2020 was “manageable in a global context” thanks to tight underwriting standards and fiscal support to businesses and households by the city’s government, according to S&P Global Ratings. The unwinding of those support measures should not lead to significant asset quality problems for the city’s banks, the rating agency found.
“We expect the Hong Kong economy to sharply rebound supported by policy initiatives, strong economic growth in China, and pickup in global trade,” S&P credit analyst Shinoy Varghese said in a research note. “The banking sector’s credit losses should therefore decline over the next two years and could potentially reach pre-Covid levels earlier than the end of 2022.”