HSBC under the pressure of dividend questions as first-quarter profit falls

Prospects for higher dividends at HSBC (HSBA.L) (0005.HK) dimmed on Tuesday after Europe’s largest bank reported a 14 percent fall in quarterly gain and flat capital reservations.

While the fall in first quarter gain was less than anticipated, HSBC’s key capital ratio was unchanged in the end of 2015 at 11.9 percent against analyst predictions for 12.1 percent.

The challenge the bank faces to construct capital buffers big enough to grow its 8 percent dividend is shown by that – something management is committed to. The payout is the highest among leading lenders that are European, based on Thomson Reuters data.

“In such an earnings environment and the fact that they still haven’t touched the regulatory capital requirements, makes a progressive dividend untenable,” Bernstein analyst Chirantan Barua said in a note published immediately after the earnings.