HSBC's accumulated dividend payout for the first three quarters this year rises to $0.54. Due to the better-than-expected payout, shares of HSBC yesterday jumped by 0.54 percent to close at HK$92.50 yesterday. AP

HSBC is likely to cut its dividend payout in the next financial year as the bank's net profits might drop significantly, analysts predicted.

HSBC yesterday declared the third quarter interim dividend of $0.18 per share. Compared with last year, the dividend payouts remain unchanged and that made the accumulated dividend payout for the first three quarters this year rise to $0.54.

HSBC, which has a decent dividend-payout track record among local lenders, was rumored to have revised its dividend policy.

The speculation came after Morgan Stanley earlier predicted that HSBC will slash dividend payout by as much as 50 percent in 2008 in view of a massive write-down of its US businesses.

Boosted by the better-than-expected dividend payout, HSBC shares yesterday rose by 0.54 percent to close at HK$92.50.

However, analysts remained cautious toward the lender's financial outlook, saying HSBC management might announce to cut dividend payout at the year-end result next February.

"I believe that HSBC will reduce dividend payout by 20 percent over the coming financial year," said Patrick Shum, chief portfolio strategist of Karl Thomson Securities.

"The lender is expected to post a 30 percent decrease in net profits upon the year-end result announcement. It, therefore, has to downsize its dividend payout to strengthen its cash position amid the economic downturn," he added.

However, Chairman of Hong Kong Institute of Investors Ricky Tam has a different opinion.

"I don't think HSBC will easily change its dividend policy, even though other US counterparts lead to cut their dividend payout ratios," said Tam. "With plentiful reserves, HSBC can stand the market condition for a longer time."

He, however, did not rule out the possibility that the lender will lower the dividend payout in the 2009-10 financial year if the global economy further deteriorates.

In addition, HSBC's affiliate Hang Seng Bank yesterday declared its third-quarter dividend of HK$1.10 per share, same as what was offered in 2007. Shares of Hang Seng yesterday went up 1.15 percent to close at HK$96.10.

Meanwhile, investment bank Goldman Sachs upgraded Hang Seng Bank's rating from "neutral" to "buy".

The report added that the lender will outperform other local counterparts. "(Hang Seng) is the only Hong Kong bank that we project flat earnings for 2009 versus 28 percent average earnings decline for the sector."

(HK Edition 11/04/2008 page3)