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* Banks to cancel 2019, interim 2020 dividends
* Move in response to request from UK regulator
* Regulator wants banks, insurers not to pay top staff
bonuses
* Banks yet to state changes to bonuses
* Banks' shares fall more then 5% on Wednesday morning
(Adds share reaction)
By Lawrence White, Iain Withers and Sinead Cruise
LONDON, April 1 (Reuters) - Britain's top banks have axed
dividend payments after pressure from the regulator, saving
their capital as a buffer against expected losses from the
economic fallout from the coronavirus.
Barclays, HSBC, Lloyds Banking Group
, Royal Bank of Scotland, Standard Chartered
and the British arm of Spain's Santander all
halted payouts in a co-ordinated industry response to a request
from the Prudential Regulatory Authority (PRA) on Tuesday.
The lenders had been due to pay out over 8 billion pounds
($9.93 billion) between them in 2019 dividends, with HSBC the
biggest payer at $4.2 billion.
The PRA also asked banks and insurers not to pay senior
staff bonuses this year, although none of the banks opted to
provide details on how they would comply with this second
request.
The British lenders also held off announcing changes to
their executive pay policies.
Shares in domestic-focused lenders Lloyds and Barclays shed
more than 5% each in early trading, while HSBC and Standard
Chartered saw their stocks fall 7.7% and 6% respectively by 0708
GMT.
Hong Kong shares of HSBC fell as much as 9.9% to
their lowest since March 2009, while StanChart dropped 7.4% in
the morning trade on Wednesday. The broader Hong Kong market
index was down 0.4%.
The PRA said banks entered the pandemic, which has put
Britain into lockdown, with strong capital positions, enough to
withstand a severe UK and global recession.
Banks pay out dividends as a means of rewarding shareholders
and disposing of excess profits, but they have the option to
retain the earnings instead to preserve their capital levels.
While suspending investor distributions was described as
prudent by the lenders, analysts at Jefferies said the move had
"structurally bearish ramifications" for the sector, including
raising the cost of equity.
"...It is not beyond the wit of man that some banks might
need rights issues and all of this uncertainty in our view
ultimately weakens prospective investment propositions."
FOLLOWING ECB'S LEAD
The statements from British lenders come after the European
Central Bank (ECB) last week asked euro zone lenders to skip
dividend payments and share buybacks until October at the
earliest, and use their profits to support the economy.
Several of Europe's largest lenders, including UniCredit
, and Societe Generale, have already
announced they will hold off paying 2019 dividends for now.
However, there are some hold outs. Swiss banking giants UBS
and Credit Suisse have both said they plan to
press ahead with 2019 dividends despite their home regulator
urging caution over payouts.
The move to scrap 2019 shareholder distributions is expected
to free up capital that banks can instead lend to businesses and
consumers rocked by the coronavirus pandemic.
But some analysts believe cancelling dividends could
actually harm the supply of credit to the real economy.
"We note that euro area bank market capitalization fell on
30 March by the same as the 30 billion euros 'saved' by its
dividend ban on Friday 27 March," analysts at Bank of America
Merrill Lynch said in a note, referring to the ECB's move.
The European Union's banking watchdog said earlier on
Tuesday that banks should be "conservative" in how they award
bonuses to preserve capital and keep lending during the
coronavirus pandemic.
However it stopped short of calling on banks to stop bonuses
altogether.
Italy's UniCredit and Spain's BBVA have both said this week
that their top management will waive their 2020 bonuses.
Standard Chartered signalled in a memo on Monday that the
bank would likely cut its 2020 executive payouts.
PRA Chief Executive Sam Woods also wrote to heads of
insurers, saying they should pay "close attention" to the need
to protect policyholders and maintain safety and soundness when
considering bonuses or dividends.
HSBC signalled a gloomy first-quarter earnings season for
British banks, warning in its statement that it would see bad
loans rising and revenues falling as the economic impact of the
pandemic hits.
The coronavirus has infected more than 850,000 people
globally, and killed over 42,000, a Reuters tally shows. For an
interactive graphic tracking the global spread of the virus:
open https://tmsnrt.rs/3aIRuz7 in an external browser.
($1 = 0.8059 pounds)
(Reporting By Lawrence White and Iain Withers, additional
reporting by Huw Jones, Sinead Cruise in London and Sumeet
Chatterjee in Hong Kong; Editing by Himani Sarkar and Jason
Neely)
