No-score draw

16 December 2014 By George Hay Follow @gfhay

Standard Chartered comfortably passed the Bank of England’s tough stress test, while RBS and Lloyds just scraped through. Yet the BoE exercise was easier on emerging markets-focused lenders. The banks’ scores still leave investors with significant uncertainty about dividends.

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Three major UK banks were undercapitalised at the end of 2013, the Bank of England stress test of eight UK lenders revealed on Dec. 16.

Co-operative Bank, Lloyds Banking Group and Royal Bank of Scotland needed to strengthen their solvency, the BoE’s Prudential Regulation Authority found. However, due to capital actions already undertaken during 2014, only Co-operative Bank has been required to submit a new capital plan.

RBS’s core Tier 1 ratio fell from 8.6 percent at the end of 2013 to 5.2 percent at the end of a three-year stress period, including mitigating management actions. Lloyds’s capital ratio fell from 10.1 percent to 5.3 percent. Co-operative Bank’s fell from 7.2 percent to minus 2.6 percent.

Barclays, Standard Chartered, HSBC, Nationwide and Santander UK all had post-stress core Tier 1 ratios of 6.7 percent or higher.

StanChart’s core Tier 1 fell from 10.5 percent at the end of 2013 to 8.1 percent, while HSBC’s fell from 10.8 percent to 8.7 percent in the stress scenario.

Just after 1300 GMT, StanChart’s shares were down 0.6 percent to 888 pence, RBS’s were down 1.2 percent at 359 pence, Lloyds’ were up 0.2 percent at 74.6 pence, HSBC’s were down 0.4 percent at 590 pence while Barclays’ stock was down 1.4 percent at 222.2 pence.

Context News

Three major UK banks were undercapitalised at the end of 2013, the Bank of England stress test of eight UK lenders revealed on Dec. 16.

Barclays, Standard Chartered, HSBC, Nationwide and Santander UK all had post-stress core Tier 1 ratios of 6.7 percent or higher.

StanChart’s core Tier 1 fell from 10.5 percent at the end of 2013 to 8.1 percent, while HSBC’s fell from 10.8 percent to 8.7 percent in the stress scenario.

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