Analyst Note| Michael Wu, CAIA |
While we expected the Prudential Regulation Authority, or PRA, to allow large United Kingdom banks to pay a dividend in fiscal 2020, the absolute dividend payment allowed was lower than anticipated. PRA is also carrying out a systemwide stress test in mid-2021 with results expected at the end of 2021. As such, no interim dividends in 2021 are expected and a final dividend likely at year-end. With consensus split on none, or a small dividend payment in 2020, we expect the PRA announcement to be slightly positive for HSBC Holdings' and Standard Chartered's share price. Both banks remain undervalued.