BANKS led UK firms in dividend payments last year for the first time since the financial crisis, according to new research, after interest rate hikes gave lenders wider margins to raise investor rewards.

Figures from Computershare showed British lenders dished out £13.8bn over the course of 2023, up nearly a third (£3.2bn) from the previous year and representing 15 per cent of the overall figure.

Total UK regular dividends came in at £88.5bn for 2023, up 5.4 per cent from the previous year. The headline total, including volatile special dividends, ticked down 3.7 per cent to £90.5bn.

The end of 2023 saw a spike in dividend growth, with a 15.6 per cent increase between the third and fourth quarters.

This acceleration was driven by Asia-focused giant HSBC, which awarded £8.4bn over the course of last year - nearly double the £4.4bn it paid in 2022.

HSBC reasserted itself as the country's biggest payer for the first time since 2008 after awarding its first quarterly dividends since 2019. It has promised a $4bn special dividend from the sale of its Canadian business to RBC, agreed in November.

Banks' profits were boosted by the Bank of England hiking interest rates 14 times in a row until last September, giving them scope for much larger dividends.

HSBC's most recent results saw profits more than double year-on-year and revenue jump 40 per cent.

"The return to prominence by the banks is really remarkable," said Mark Cleland, chief of issuer services at Computershare. "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 has delivered a dramatic turnaround." Dividend growth was slowed by large share buyback programmes from companies including HSBC, Shell, Glencore, BP and Aviva.

(c) 2024 City A.M., source Newspaper