Sitaraman Shankar and Dominic Lau
Europe's top banks, already under fire for questionable investments, risk alienating shareholders further if a trend takes hold to pay dividends in shares rather than cash. Analysts say excessive use of share dividends - especially to disguise lower payouts - could bring more punishment from the market, which has lopped off 12 percent from the value of European banking shares since the beginning of the year. The subprime crisis has forced banks to make big writedowns on credit assets. Many have unveiled rights issues aimed at repairing their balance sheets and shoring up their capital.
In all this, dividends have increasingly become a casualty. Swiss bank UBS, Royal Bank of Scotland and Britain's biggest mortgage lender HBOS were among the first to pay dividends in shares, but analysts say many others are likely to follow.
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