Britain’s big banks have around 27% of their market valuations available to fund shareholder distributions or for other uses, according to JPMorgan
The Bank of England is due to release the results of its latest strength testing of the wider UK financial system and of the individual banks, with the side effect of determining the size of potential dividend handouts for investors.
Stress tests assess how lenders can cope with severe economic scenarios, with regulators making sure each of them has enough capital to withstand extreme shocks as well as being able to continue supporting the economy through the aftershocks of any crisis.
Those covered by the 2021 stress test are Barclays PLC (LSE:BARC), HSBC PLC (LSE:HSBA), Lloyds Banking Group PLC (LSE:LLOY), Nationwide Building Society, NatWest Group PLC (LSE:NWG), Santander UK Group Holdings, Standard Chartered PLC (LSE:STAN) and Virgin Money UK PLC (LSE:VMUK).
Individual firm-by-firm results from the stress test will published today, with the BoE having published details of this year’s testing back in the spring.
In total, Britain’s FTSE 100 banks, Barclays, HSBC, Lloyds and NatWest, have around 27% of their market valuations available to fund shareholder distributions or for other uses, such as the bolt-on acquisitions being pursued by Lloyds lately, according to research from JP Morgan last month.
Analysts at JPM said the size of the payouts is likely be determined by the next round of stress tests on 13 December, but the background is “favourable”, with capital returns likely to be a key focus of the results for 2021.
JPM is forecasting a return of £1bn from Barclays plus a 4% yield, Lloyds is predicted to initiate a £1.5bn buyback with a 4% yield, while NatWest should continue to buy back the government’s outstanding stake.
Read More: Lloyds Banking Group, Barclays PLC, NatWest Group PLC and HCBS’s