Barclays yesterday derided the scrip dividends paid by rival banks, saying that it understood investors’ desire for cash, The Times reports.
Unveiling the bank’s first-quarter trading update, John Varley, chief executive, called scrip dividends an oxymoron and ruled out paying Barclays shareholders in stock.
“A scrip dividend isn’t really a dividend. We’re clear about what our shareholders like. They like dividends and dividends mean cash,” he says.
Royal Bank of Scotland (RBS), HBOS and Bradford & Bingley (B&B) said recently that they would pay their interim dividends in shares, as they announced rights issues worth a combined 16.3 billion. UBS, the troubled Swiss bank, will also make its half-year shareholder payment in stock.
Barclays withstood pressure to raise fresh capital, despite revealing a further 1.7 billion in writedowns on its credit investments and admitting that its capital cushion had fallen even further below target. The bank has said that instead of raising extra capital, it could increase its ratio – which is used by regulators to determine the banks’ financial strength – by cutting risky assets or increasing profits.
RBS, HBOS and B&B opted for rights issues to take their core equity Tier 1 ratios above 6%, which they said was essential in volatile markets. But Mr Varley was scornful of such targets and said that a few months of stable stock markets would raise questions about their rush to issue equity.
“Six per cent isn’t an eternal truth,” he says. “You should be appropriately begrudging in your capital issuance. If there were three months of stability in the market, I think there would be a lot more questions about share issuance so far.”
However, he does not rule out some form of capital raising: “We’re not taking any of these options off the table.”