Banks dish out £7.8bn in dividends as rising interest rates boost profits
UK banks have dished out bumper payouts to investors over the past three months as lenders rake in profits on the back of rising interest rates, according to new research.
Banks hiked their dividends to shareholders by 61 per cent to some £7.8bn to investors in the three months to the end of June, despite a wider slowdown in dividend payments to shareholders, according to the latest dividend monitor from Computershare.
UK dividends fell nine per cent in total on a headline basis to £32.8bn in the second quarter, on the back of a slowdown in frothy one-off special dividends.
The bumper period for banks comes as lenders make hay on the back of rate hikes over the past year and charge higher costs to borrowers.
Mark Cleland, chief of issuer services at Computershare, said UK firms collectively had made bumper profits last year and dividends had followed suit.
“Banking profits are soaring as they benefit from higher interest rates, and dividends are following suit,” he added.
“Outside the banking sector, companies with pricing power are building margins, contributing to inflation but in turn boosting their dividend fire power, and there are still small pockets where dividends are still catching up after cuts made during the pandemic, which is boosting the total paid.”
HSBC is on track to becoming the UK’s largest dividend payer this year for the first time since 2008 after signalling it has cash to burn on further hikes in payouts and share buybacks this year.
The biggest negative impact on the overall figure came from sharply lower mining dividends, which fell by a third as lower commodity prices impacted cash flows in the sector.
Mining firms had led the charge over the past two years as wild commodity prices helped push up profits.