God save the bank

April 01, 2020 13:12
HSBC said, “The Board regrets the impact this cancellation will have on our shareholders, including our retail shareholders in Hong Kong, the UK and elsewhere.Photo: Reuters

How does a shareholder feel about a company cancelling its promised dividends?

Ask loyal HSBC shareholders who woke up overnight to find out that the bank is cancelling the 2019 fourth interim dividend under the pressure from the Bank of England amid the coronavirus epidemic.

Originally HSBC shareholders would receive 21 US cents of dividend per share by 14 April, but now the bank will not resume dividend payment at least till next year.

In a statement, HSBC said, “The Board regrets the impact this cancellation will have on our shareholders, including our retail shareholders in Hong Kong, the UK and elsewhere.”

“The Board has also decided that until the end of 2020 we will make no quarterly or interim dividend payments or accruals in respect of ordinary shares, or undertake any share buybacks in respect of ordinary shares.”

HSBC shares ended the quarter 27 per cent lower. The counter lost 9 percent in the morning session Wednesday.

We hope this is not the reason why the bank had delayed its informal meeting with Hong Kong shareholders.

In a statement, HSBC explained its chairman Mark Tucker and senior management will not be able to be together due to the Covid-19 situation and therefore decided to postpone the meeting until it is prudent and practical for it to take place.

Many loyal Hong Kong shareholders of the bank are retirees who rely on the quarterly payment, the bank started quarterly dividend since August, 2003 and did not miss a dividend payment even in the depth of financial tsunami in 2008-9.

Chief executive Noel Quinn, who is tasked to undergo a major cost restructuring exercise but reversed and adopted a “no hire, no fire” policy last week, is apparently trying to become a model corporate citizen in this testing period.

But, how would HSBC be able to win over investors again without dividends, or cost-cutting measures?

God save the bank.

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EJ Insight writer