Home  Contact Us
  Follow Us On:
Advertising Advertising Free Newsletter Free E-Newsletter
      2024       2023       2022       2021       2020       2019       2018       2017       2016       2015       2014       2013       2012       2011       2010       2009       2008

FOCUS: Chinese banks to follow HSBC in axing dividend amid slump
Share to

Chinese banks to follow HSBC in axing dividend amid slump

BT 202011 FOUCS 02China is currently facing the biggest earnings hitch for the first time since the global financial crisis in 2008, and it is assumed that the country’s banks might have to reduce, or even completely avoid,dividend payout in 2020, following the footsteps of some western banks.

It was revealed by some of the nation’s most dominant lenders that this quarter has recorded the worst slump in more than a decade. Reports state that the country has asked its lenders to sacrifice their profitability to perform a national service and to support the country’s economic recovery.

It is highly likely that shrinking profit would cause the lenders to hold up their capital adequacy barrier in the middle of a surge of bad loans as businesses collapse from the impacts of the COVID-19 pandemic. China’s economy shrank 6.8% in the first quarter, before rebounding 3.2% last quarter.

BT 202011 FOUCS 03Experts predict that if the banks continue to maintain their usual dividend payout ratio, they might have to encounter a dramatic drop in their capital adequacy ratios. A 10% drop in net profit is likely to cause banks to withhold dividend this year, while a 5% setback could direct them to reduce the payout ratio by 10% age points.

Chinese bank officials fear that their 2020 full-year profit will continue to grow weaker after recording about 9% to 10% drop in the first half. Their core tier-1 capital ratios have also declined as they called up provisioning for bad loans.

Investors who have been accustomed to seeing a 20% to 30% payout over the years would feel blown out by scaling back dividends. This matter grabbed public attention when HSBC scrapped its final interim dividend, declaring that it was not planning any further payments.

HSBC reported that their first-half profit has halved and predicts loan losses could swell to $13 billion this year. The bank’s stock has fallen more steeply than most big rivals this year, with Citigroup Inc. and JPMorgan Chase & Co. reporting declines of 44% and 29%, respectively.

BT 202011 FOUCS 04The Chinese government urges banks to sacrifice as much as 1.5 trillion yuan in profits this year to finance cheap loans, cut fees, defer loan repayments and grant more unsecured loans to support small business organizations to beat the plunge and to overcome the crisis.

Support measures imposed on banks with relation to the COVID pandemic will mean that city commercial banks will face a double headwind in capital replenishment, and worsening asset quality.

Such state order might cause smaller city and rural commercial banks to feel a bigger impact, due to their limited source of earnings.

Banks will be able to strengthen their tier-1 capital by 300 billion yuan to 500 billion yuan by 2024, just by slashing their dividend payout ratio from 30% to a range of 20–25% over a period of five years.

BT 202011 FOUCS 05Major bank shareholders, like China’s national social security fund, depend on dividend payments to increase their funds, which is a factor to be given special attention when banks adjust their dividend policy.

Banks have very limited avenues in refilling their core tier-1 capital, whereby the regulatory minimum requirement is at 7.5%. A part of a bank’s capital that supports them guard against unexpected expenses, core tier-1 can only be satisfied either by earnings, or common equity.

State-controlled Chinese banks are not allowed to price new share placements below their per-share book value, as per the regulations. As banks fell out of favor with investors, some like Industrial and Commercial Bank of China, China Construction Bank have seen that ratio languish below one.

自2008年全球金融危机以来,中国目前正首次面临最大的盈利障碍(EARNINGS HITCH)。据推测,国内的银行可能会跟随西方银行的脚步,在2020年减少,甚至完全不支付股息。一些美国最大的几个放贷方透露,本季度有着十多年来最严重的暴跌。报告指出,政府已要求放贷方牺牲其利润来为国民提供服务,并推进该国的经济复苏。第一季度,中国经济萎缩了6.8%,但上一季度反弹了3.2%。专家预测,如果银行继续保持其通常的股息派发比率,它们可能将不得不面临资本充足率的急剧下降。银行管理人员担心,他们的2020年全年利润在上半年下降约9%至10%,之后将持续走弱。汇丰银行(HSBC)宣布不计划进一步派息,此事引起了公众的关注。本文为您介绍详细内容。

    Subscription    |     Advertising    |     Contact Us    |
Address: Magnetic Plaza, Building A4, 6th Floor, Binshui Xi Dao.
Nankai District. 300381 TIANJIN. PR CHINA
Tel: +86 22 23917700
E-mail: webmaster@businesstianjin.com
Copyright 2024 BusinessTianjin.com. All rights reserved.