HSBA Hsbc Holdings Plc

   By Martin Mou 
 

HSBC Holdings PLC's shares continued to slide on Thursday morning, a day after it said it would scrap its dividend in response to a request from the Bank of England.

HSBC's Hong Kong shares were 3.0% lower at the midday break, extending their losing streak to a sixth session and taking year-to-date losses to 36%. The bank's shares in both Hong Kong and London tumbled 9.5% on Wednesday.

Fitch Ratings on Thursday downgraded HSBC's outlook to negative from neutral, saying the London-based bank's asset quality and earnings face pressure from lower business volumes and higher loan-impairment costs. Fitch expects the U.K. economy to shrink 4% this year on virus-induced damages.

Britain's largest banks, including HSBC and Standard Chartered, this week agreed to cancel 2019 dividends at the request of the Bank of England, a move aimed at shoring up their capital buffers against economic shocks stemming from the coronavirus pandemic.

Retail and other investors own shares of U.K. banks for their yield, most notably HSBC, Citi said in a research note, adding that the dividend cuts risks resulting in further underperformance by British banks in the near term relative to U.K. insurers and global banks.

Banks worldwide have been stepping up efforts to provide liquidity to businesses and households as the coronavirus pandemic slashes business revenue and household income.

Earlier this month, the biggest U.S. banks put share buybacks on hold and pledged to free up their capital to help consumers and businesses struggling with the rapid economic slowdown caused by the pandemic. Other banks in Europe have canceled or delayed dividend payments amid concerns about their ability to absorb a potential rush of bad loans.

Write to Martin Mou at martin.mou@wsj.com

(END) Dow Jones Newswires

April 02, 2020 01:18 ET (05:18 GMT)

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