Barclays Bank plans to resume paying dividends to shareholders after a 15-month break after both it and its rival HSBC said yesterday that the worst of the credit crunch was over.
While Barclays' dividend will come in at only 1p, it is a highly significant step, following the bank's announcment that its losses on bad loans would come in the bottom end of a range of £9bn to £9.6bn. Over the first nine months of the year, its bad debts rose by nearly two-thirds to £6.2bn.
Chris Lucas, the finance director, said of the decision to resume paying out to investors: "We think this is the right thing to do. It provides some degree of compensation to our shareholders. They were important last year when we looked to raise capital. It is only a small payment but we think it is an important statement"
Mr Lucas said Barclays was still actively conserving capital,despite the payout, but did expect to be able to increase the dividend over time. He also dismissed suggestions that the bank could spin off its retail division from its highly profitable investment banking arm, although he accepted that regulators might demand ring-fencing of certain parts of the business.
Over the first nine months, Barclays' pre-tax profits fell by nearly a fifth to £4.5bn, still a creditable result, although investment banking profits fell by 38 per cent. Despite this, the figures could again ignite the row over bonuses, although Barclays said it would comply fully with recent pay agreements. In common with other banks, it will not reveal its bonus pool. The bank's shares closed down 17.5p at 325.35p last night.
If anything, HSBC was even more upbeat. The company said its profitability was "stronger than our expectations at the start of the year, as positive trends experienced in the first half continued into the third quarter".
Significantly, HSBC indicated that losses from its US business Household International were finally slowing. It was responsible for the first profits warning in the bank's history, and was one of the early indicators of the sub-prime mortgage disaster that plunged the world into recession. However, HSBC said it had recovered strongly and loan losses were now at their lowest level since the second quarter of 2008. The chief executive, Michael Geoghegan, said recovery was under way but warned of a "two-tier" rebound.
He also voiced annoyance that HSBC will not be allowed to participate in the auction for the parts of Lloyds and Royal Bank of Scotland that have been ordered as a consequence of their taxpayer funded bailouts. Mr Geoghegan said: "We should have been allowed to participate. We are frustrated that there is not a level playing about who is allowed to acquire [the businesses]."
HSCB's shares finished strongly ahead yesterday, gaining 27.8p to close at 720p after investors were cheered by a performance that beat forecasts.Reuse content