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Polar Capital Global Financials promises to hold dividend despite bank cuts

Investment Trust Insider on Perpetual Income and Growth

Polar Capital Global Financials promises to hold dividend despite bank cuts

By Jeremy Gordon 05 May, 2020, Investment Trust Insider

Polar Capital Global Financials (PCFT), the only investment trust specialising in banks and insurers, has reassured investors it can maintain its dividend this year despite many UK banks and insurers cutting distributions in the coronavirus crisis.

The board of the £121m investment trust has announced it would use revenue reserves to support the semi-annual dividends underpinning its 4.5% yield , even though its portfolio was likely to deliver ‘lower-than-expected income returns’ during the pandemic.

‘This is a unique feature of the investment trust structure which the board expects will enable it to maintain the dividend for the current financial year at an equivalent level to last year.

‘This approach will give the fund manager time to assess the structure and longer-term income capability of the portfolio in a post-Covid environment and to determine the appropriate longer-term distribution level,’ the board said in a statement…

In mid-March, the eight largest US banks, which include large PCFT positions Bank of America (BAC.N) and top holding JPMorgan (JPM.N), announced they would suspend share buyback programmes, which form a larger proportion of shareholder returns than in Europe. So far, no major US banks have suspended dividends.

‘Balance sheets across the global banking sector are much better capitalised than they were in the lead-up up to the 2008 global financial crisis,’ said James Carthew, QuotedData’s head of investment company research, after the announcement.

‘While the real economy repercussions will inevitably restrict lending, the fact that much of the loan provision baton has been taken-up by the leveraged loan market means that banks are less exposed to potentially bad loans than many might think.’

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