Neil Woodford warns bank dividends will disappoint

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Neil Woodford has warned investors UK banks’ dividends will disappoint as he continues to avoid the sector.

In a video blog on Woodford Investment Management’s website, the star fund manager says together with mining and industrial stocks, financials are more likely to see dividend cuts amid slow growth in those sectors.

Woodford says: “The market’s view, for example, [on] Lloyds, Barclays and Royal Bank of Scotland], was they would be generating surplus capital and distributing that to shareholders. I think that is not going to happen.”

In November, speaking at the AJ Bell Investival conference, Woodford said he has been out of the banking sector for “a long time” largely because he finds the businesses too difficult to analyse.

He said banks are facing some “very challenging headwinds” and are a “pretty impenetrable” business.

Woodford previously owned HSBC for a brief period last year in the Woodford Equity Income fund, but dumped the stock two months after buying it.

Woodford will continue to hold his biggest holding, tobacco stocks, as there is “an explicit commitment to deliver 10 per cent dividend growth.”