10 June 2008
Updated 11 June 2008

Banks reading from the wrong ‘scrip’ – says Charlotte Black, Head of Corporate Affairs, Brewin Dolphin, the largest independent private client portfolio manager in the UK

“The decision by HBOS and Bradford & Bingley to announce their interim dividends will be paid in shares rather than cash is disappointing. This “scrip dividend” is, in effect, a further dilution of shareholdings and is the direct result of unjustified bravado in announcing greater increases in dividends than were expected. Worse still, at Bradford & Bingley a final cash dividend could be significantly scaled back, while RBS may also reduce their cash dividend per share.

The banks are well and truly hoist by their own petard and shareholders will be left feeling more than a little peeved.

Scrip dividends are taxed in the same way as cash dividends and must be taken as shares leaving the investor to find the cash in order to pay income tax at their highest rate. Scrip dividends also lead to confusion of capital and income with particular significance for life tenants of trusts, who may have to persuade their trustees to sell the scrip dividend shares on their behalf in order to pay them their income.

For this reason we held several meetings with RBS, who had also announced that their interim dividend would be paid as ‘scrip’ - to encourage them to make a Bonus Issue instead – and today they have announced that shareholders will receive extra ‘bonus’ shares instead of a ‘scrip’ dividend. So there will be no income tax payable on the receipt of these RBS shares, however CGT at 18% may be payable when they are sold, according to individual circumstances. We would urge HBOS and B&B to consider the same alternative to the ‘scrip dividends’ they have announced in the interests of their many thousands of private shareholders.”

Notes to Editors:

• RBS Bonus Issue – at yesterday’s share price 235p – shareholders could expect to receive 47 shares per 1000 shares held.
• Bradford & Bingley EGM 16 June – Brewin Dolphin will be voting in favour of the resolutions on behalf of its Discretionary clients.
• Shareholders should take advice from a professional adviser regarding their personal tax position before selling bonus shares.

Media Contact:
Charlotte Black - BD Press Office +44 20 3201 3331 / 3330
Vee Montebello - Hume Brophy PR Agency +44 (0) 20 7499 8736