The chairman of Royal Bank of Scotland (RBS) has called on the Bank of England to lift curbs on dividends by the autumn to make lenders more attractive to investors.
The BoE had told lenders in March to scrap buybacks and dividends until the end of 2020 to bolster their finances in the face of the economic crisis triggered by coronavirus.
Howard Davies said today that banks could not suspend payouts indefinitely.
“It’s probably fair to say the banking sector is not investible because when people try to do the models about what banks are worth they can’t plug in any numbers for cash out,” he told a City & Financial webinar.
RBS, along with Barclays, HSBC and Lloyds, suspended dividend payments for 2020 at the central bank’s request in March.
Shares in RBS, which is majority state-owned, have fallen by around half this year, wiping £15bn off its market capitalisation. Shares in rival Lloyds have also dropped just over 50 per cent, while HSBC and Barclsys have fallen by around 35 per cent apiece.
British banks have lent more than £40bn of state-backed funds to businesses struggling with the impact of the pandemic, but are bracing for an expected wave of defaults in the coming months.
“We can see clouds gathering on the horizon, but it hasn’t yet started to pour down with rain, but I think we know that it’s going to, and that’s going to be a very difficult period for us,” Davies said.
The Bank of England declined to respond to Davies’ comments. RBS has been contacted for comment.