Banks given permission by BoE to restart dividend payments

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The UK’s big five banks will be able to restart dividend payments next year after the Bank of England lifted its temporary ban.

Due to concerns about the potential effect of the coronavirus pandemic, the Bank of England’s Prudential Regulation Authority (PRA) told the banks to hold fire on dividends back in March.

READ: Banks have plenty of capital but will dividends return soon?

But on Thursday evening the PRA, which has been in discussions with the lenders for some months, said its assessment was that banks are sufficiently “well capitalised and able to support the economy” and so it felt there is “scope for banks to recommence some distributions should their boards choose to do so”.

It said these payments should be “prudent”, noting that there are still high levels of economic uncertainty as a result of the pandemic, with ongoing economic disruption from the effects of the virus and with widespread government economic support still in place.

The PRA told banks they must exercise a “high degree of caution” in making decisions about cash bonuses.

According to their most recent results, Lloyds Banking Group PLC (LON:LLOY) had a capital reserve ratio of 15.2%, which is above the 15% level at which ended last year when it paid out a final dividend of 2.25p per share, totalling £1.6bn.

For HSBC PLC (LON:HSBA), its CET-1 ratio was 15.6%, for Barclays PLC (LON:BARC) it was 14.6%, Standard Chartered PLC (LON:STAN) reported a capital ratio of 14.4% and strongest of all was NatWest Group PLC (LON:NWG) with a ratio of 18.2%. 

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