Sunday 27 September 2020 5:31 pm

Natwest and Lloyds signal willingness to bring back dividends

Two of the UK’s largest banks have indicated that they are ready to restart paying dividends as the Bank of England prepares to review its ban on shareholder payouts. 

Executives at Natwest and Lloyds have hinted at the strength of their balance sheets, with Natwest chairman Howard Davies saying lenders would resume paying dividends if regulators lifted the ban. 

Read more: Bank of England could extend bank dividends suspension

“I’m not aware of anyone [among the big banks] who is in deep trouble,” Davies told The Mail on Sunday. “The banks would be in a position where they could distribute [dividends] at some level.”

Following pressure from the BoE’s Prudential Regulation Authority (PRA), British lenders agreed in March to scrap dividends totalling roughly £8bn for the year in order to shore up their finances against the economic downturn caused by the pandemic.

The PRA is set to assess whether to extend the ban on dividends beyond the end of the year in the next three months. 

The European Central Bank has extended its recommendation that lenders in the bloc do not pay dividends until January 2021. 

Lloyds chief executive Antonio Horto-Osario said the lender’s board would not make a decision on dividends until the end of the year. 

In comments made to an online conference earlier this month and seen by the Mail on Sunday, Horto-Osario said that Lloyds would await the official “update” on the ban from the PRA.

Horto-Osario added that Lloyds had a “very, very strong buffer” to weather the economic devastation caused by coronavirus, and said the bank’s capital buffers far exceeded the requirement set by the BoE.

Read more: Evidence on negative rates ‘encouraging’, says Bank of England policymaker

Davies, who in July called on the central bank to lift the dividend ban, said that banks would only seek to issue proportional payouts. 

“Nobody is going around the banking industry saying they want to pay a massive special dividend,” he said.