Clunk! The penny (pebble?) seems to have dropped in Newcastle.
Robert Peston is reporting on the BBC’s website that Northern Rock will not be dispatching the interim dividend it announced in July – a payment of 14.2p a share that was due to be mailed out on October 26, with the stock due to go “ex” on Wednesday.
The move will save Rock £59m, but it is perhaps also a sign that this synthetic financial institution is ever-so-ever-so-ever-so slowly waking up to political reality. Albeit with a bit of help from its friends – BBC News24 was on Tuesday citing pressure from the government as a motivating factor in the bank’s change of heart.
You can’t transfer money directly from the public purse to shareholders. The public tends to complain. And rightly so.
But we’re confused. In what looks like a face saving move, the former bank is likely to defer the payment rather than cancelling it altogether, Peston adds.
Which makes us wonder what the point is – besides PR slight of hand. If the payment is still planned (at some yet to be determined date in the future), then the deferral won’t make an iota of difference to the bank’s P&L. The hope perhaps is that Rock can be seen to do the right thing in not paying out the divi now, keep a (admittedly tiddly) bit of cash in hand when times are tight – and then have a come-back party for shareholders when the interim dividend eventually gets doled out.
But why the half measures? Cancel the damn thing – and give shareholders a bumper final payout if the bank comes through in one, broadly-recognisable piece. Which no one actually believes it will.
As of 4pm, with shares in Rock trading 10p lower at 162p, there was still no official announcement confirming the move. Maybe this moral reawakening has a little further to run.