The potential economic impact of Brexit could have significant ramifications for income seekers looking to the UK's banking sector. Research from Markit suggests the UK-focused banks in particular could see dividends come under pressure over the next two years.
The biggest victim of the economic uncertainty could be RBS (RBS), which could now push out plans to return to the dividend list to 2017 and even then may only pay out half the dividend Markit previously forecast. Lloyds Banking's (LLOY) forecast 2016 dividend is cut by 10 per cent and the 2017 payment by 17 per cent. The 'challenger' banks are also expected to come under pressure with both Shawbrook (SHAW) and Virgin Money (VM.) likely to pay out less than expected this year and next.
But it is not all bad news for income investors - although the UK-centric FTSE 250 is likely to see its overall dividend payout shrink in 2017, the FTSE 100, which boasts 47 companies who are dollar earners, will see dividends grow due to the rapid depreciation of sterling. Overall, sterling dividend payments could rise by as much as £3.4bn in 2017 for the FTSE 350 due to this positive translation effect.
