Shareholders in a major bank are to share the pain from the fall out of the banking royal commission.
The National Australia Bank Thursday sliced its interim dividend by 16 cents a share – from 99 cents to 83 cents for the six months to March 31 after earnings took a hit from the costs of customer remediation payments.
The 16% cut to the dividends is in sharp contrast to the decision on Wednesday by rival ANZ to maintain its interim at 80 cents a share. NAB directors described the cut as being “prudent” and a way of “strengthening the balance sheet” so that it can meet the higher regulatory standards for bank capital from 2020
As well as the cut the bank said today it will partially underwrite its dividend reinvestment program.
It raises the stakes for Westpac and its interim of 94 cents a share because its customer remediation costs at an already reported $617 million are almost double the $325 million revealed by NAB this morning.
The NAB reported cash earnings of $2.954 billion (including the cost of the customer remediation payments) which the bank said was up 7.1%) Excluding the $325 million cash profits were flat half year on half year at $3.279 billion.
The dividend cut and weak earnings caps a year of turmoil for the NAB which was monstered at the banking and finance royal commission, heavily criticised in the final report from Commissioner Hayne, which in turn triggered the exits of the bank’s chair, Ken Henry and CEO, Andrew Thorburn.
Former Westpac executive Phil Chronican is now in charge while the bank hunts for a CEO. Once that is done Mr. Chronican will become the full-time chair of the bank.
The NAB’s Net Interest Margin fell from 1.87% in the March 2018 half to 1.79 in the latest half year period. (The ANZ saw a similar fall).
Even though it was a from a low base, there was a $73 million or 20% jump in the bank’s credit impairment charge to $449 million from $373 million (the ANZ saw a $73 million fall in the half). NAB said the higher charge included $33 million of forward-looking provisions for sectors where there was “elevated risk”.
Loans past 90 days rose to 0.79% of loans and acceptances in the March 2019 period from 0.71%. The NAB said result from ”increased delinquencies in the Australian mortgage portfolio.”
The NAB says the Australian economy is weakening and sees the Reserve Bank making “a number of (interest) cuts this year”.
