Santander and HSBC show way on divis as UK banks lag

Yes, BP may account for £1 out of every £7 paid in dividends by FTSE 100 companies. Yes, our pension funds and savings policies depend on such things to keep them ticking over.

But £6 out of every £7 is paid by companies that are not called BP. And it's not just UK shareholders who are looking for good yields. It is interesting that while the top 17 UK investors in BP own 26% of the shares, the top 17 US investors own a healthy 15%, according to Bloomberg.

So if the BP dividend is at risk (and we won't know for certain until July 27), where should we look for some secure income?

Citi's banking analysts have come up with great stuff on European banks, once stalwarts of the income funds but now very divided between men and boys thanks to the various bailouts and nationalisations.

Here's a staggering snippet from their work. At their peak, in 2007, the UK banks paid a total of 18.6 billion (£15.4 billion) in dividends, which was more than twice the $10.5 billion (£7.2 billion) BP paid out last year and also more than double the next country down, Spain at 9 billion.

But by 2009 UK banks' payout had fallen to just under 5 billion, and will recover to only 7 billion this year, according to Citi.

What is most noticeable is the fact that the UK domestic banks (RBS, Lloyds and Barclays), which accounted for 10 billion of dividends in 2008, paid almost nothing (124 million) last year as they paid the price of state or sovereign aid. In the meantime, the two international banks in the FTSE 100 (HSBC and Standard Chartered) escaped relatively unscathed from the crisis. Together they paid out 8.4 billion in 2008 and could still pay as much as 6.4 billion this year again, according to Citi's forecasts.

But the bank that really attracts the analysts' interest is Santander. In 2005, the Spanish bank was ranked fifth in the European bank dividend table.

Last year and this, it is vying with HSBC for top slot with everything that was in between fifth and first place in 2005 (RBS, Lloyds and UBS) now not even in the top 10.

Citi says that HSBC and Standard Chartered will account for 21% of all European banks' dividends this year while Santander and its Spanish rival BBVA will also account for 21%.

The only other banks worthy of real note on the continent in terms of yield would be BNP Paribas and Credit Suisse.

This may all sound a little academic but HSBC and Santander have big retail shareholder bases. Yes, primarily in Hong Kong and Spain respectively but with sizeable UK investor followings. (Taking over Abbey and Alliance & Leicester means Santander still has 1.8 million UK shareholders.)

Their managements know how much dividends matter to punters and increasingly so to their institutional shareholders as other big yielders fall by the wayside.

Staying put: The Tesco 'also rans'

It's the obvious question when a big chief executive's successor is an- nounced: "Who lost out?"

They don't come much bigger than Sir Terry Leahy at Tesco, who is being replaced by a Tesco lifer and fellow Scouser, not a breath of fresh air.

So, of course, we had the stories about who the other runners at Tesco were for the top job, and will they now be prised out of the business by some competitor offering them a better job?

The answer is almost certainly no. And for one simple reason. The front-runners are paid considerably more than their rivals anywhere else.

Phil Clarke, the actual winner, was paid £2.7 million last year. So-called also-rans were Richard Brasher (£2.4 million), Andrew Higginson and David Potts (both on £2.7 million) and Tim Mason (£4.3 million).

In each case, that's at least £1 million more than their equivalents at Sainsbury's, Morrisons and Marks & Spencer were paid. On top of that, the Tesco boys have some of the most impressive share-option, savings and long-term incentive plans around.

Why should they move anywhere where their current packages would be the equivalent in the executive world of buy one get one free?