UK Edition
Investors in some of Britain's biggest banks have urged them to press ahead with massive dividend payments even as rivals in Europe axe shareholder payouts while they weather the coronavirus storm.
Barclays, Lloyds, RBS and HSBC have around £7.5bn of payouts falling due, agreed in the previous financial year.
Barclays is due to pay more than £1bn in dividends this Friday. One of the bank's top investors said it would be unfair if the payout gets scrapped, although they would accept a delay until October.
He said that if bank dividends get axed, insurers should follow. Analysts at Jefferies suggested that Aviva shareholders appear to be pricing in three years of dividend cuts based on the insurer’s current depressed share price.
Another shareholder said that banks have already built up huge reserves on the instructions of regulators, so dividend pay-outs should be able to continue. They warned of a major hit to retired investors who rely on dividends for an income if the payments are scrapped.
They said: "For most, affordability of dividends may well not be an issue.
"Many people, especially those who are retired, rely on dividends for income and the majority of the country will be impacted through their pensions".
Ian Gordon, a banks analyst at Investec, said it is unnecessary for robust banks to cancel their declared 2019 dividends.
But he said: "2020 dividends are an entirely different matter, and in many cases are likely to be decimated by a combination of sharply lower revenues and recessionary impairments."
One banking insider said the expectation is that the payouts will be blocked by the Bank of England this week. HSBC discussed withholding its dividend over the weekend but decided to wait for a decision from the central bank's supervisory arm, the Financial Times reported.
Bank of Ireland, ING, Unicredit and ABN Amro were among those to issue statements confirming that payouts were halted following an intervention last week from the European Central Bank (ECB).
The single currency zone's 20 biggest banks are set to delay dividends worth €22.3bn (£19.8bn). The move is intended to bolster the cash they can lend to companies during the coronavirus crisis.
The Bank of England has been criticised for not yet blocking UK bank payouts. Agustín Carstens, head of the Bank for International Settlements, has called for a global freeze on bank dividends to boost lending to firms on the edge.
Last week the ECB told eurozone lenders to suspend payments until at least October.
It said the aim was to boost banks' capacity to absorb losses and support lending during the pandemic. Andrea Enriawith, chairmam of the ECB's supervisory board, said the move could free up €30bn of vital funds.
More than a quarter of London-listed companies across all sectors have cut their dividends already this month, denying investors an expected £4bn of income.
Philip Kett, an analyst at Jefferies, called on insurer Aviva to "take this opportunity to defer or cut the previously announced 2019 dividend, preserving capital until the outlook is clearer”.
It comes as Aviva, which has stopped selling travel insurance to new customers and hiked prices for those renewing, moves to exclude claims by commercial customers for losses relating to Covid-19.
In one example seen by The Telegraph, a policy sent to a large company purchasing insurance for losses arising from notifiable diseases removed catch-all wording designed to cover new diseases deemed notifiable by the Government from the date of their initial outbreak.
Aviva instead offered cover only for a defined list of diseases, which did not include Covid-19.
Insurance experts say that including cover for pandemics as standard would make insurance unaffordable for most businesses. Aviva declined to comment.