2020 saw global dividends fall sharply following the impacts of the Coronavirus pandemic, with cuts totalling USD$220 billion in Q3 and Q4 alone, resulting in a 12.2% year-on-year fall. As a result, global banks incurred significant revenue declines on their trading desks.
Historically, structured products have been designed such that a bank’s clients can benefit from the underlying return of the asset, an equity index for example, whereas the dividend payments would go to the issuer of the product. While this could result in healthy revenue in times of high yields, it also implies that any fall in expected dividend pay-outs would cause unpredictable losses for the bank.
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