Banks dish out £14 billion cash to shareholders as interest rate rises boost profits

HSBC dominated dividend payments in 2023

Banks, including HSBC, Lloyds and NatWest, have given out nearly £14 billion in dividends to shareholders last year, more than any other sector.

This is a significant increase from the previous year and marks the first time since 2007 that banks have been the highest-paying sector. The rise in payouts has been attributed to higher interest rates and increased profits. In total, companies listed on the London Stock Exchange’s main market paid out £90.5 billion in dividends last year.

General dividends, not counting special one-time payments, went up to £88.5 billion, which is 5.4% more than last year. Mark Cleland, who’s in charge of UK issuer services at Computershare, said that the increase in banking dividends last year was “remarkable”.

He explained: “Thirteen years of rock-bottom interest rates made it very hard for the sector to make profits, but the need to quell inflation with higher interest rates means the last two years have delivered a dramatic turnaround. Bank investors are reaping the dividends of this reversal and we expect them to see even larger payouts in 2024.”

Last year saw banks having to show they were strong after the fall of America’s Silicon Valley Bank and the big European bank Credit Suisse. The Government, the Bank of England, and some banks tried to calm down worried investors and customers by saying that UK banks were “resilient” and didn’t have the same problems as the banks that went under.

Also, higher prices for energy meant nearly a 16% rise in dividends from oil companies, with Shell being the second-biggest dividend payer in the UK. The five biggest companies HSBC, Shell, Glencore, British American Tobacco and Rio Tinto accounted for just over 31% of all UK dividend payments last year.

Regular payments are expected to increase by 2% in 2024 to a total of £89.8 billion, according to Computershare.

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