So will Australian financial regulators follow their peers in the EU and UK and tell major banks to suspend dividends and planned buybacks?
The ECB earlier this week directed major Eurozone banks to drop planned dividends for 2020 and share buybacks and early Wednesday, Sydney time, UK regulators followed suit.
The UK action was directed at the likes of Barclays, RBS, Lloyds, Standard Chartered, Santander and HSBC all of whom have agreed to not proceed with dividends.
They all ruled off their accounts for the quarter, half-year or full-year on March 31,
Three of the big four local banks ruling off their interim accounts on March 31 as well (Westpac, ANZ and NAB) and Macquarie ruling off its full-year figures.
The Commonwealth balances on June 30.
CBA fell 21.8% in March and 22.6% for the quarter, NAB fell 30.8% and 32.3%, Westpac shares slid 28.1% and 31.9% and ANZ shares dropped 29.3% and 31.1%.
These huge losses for the market’s core sector help explain the 24% plunge for the quarter.
Macquarie shares also took a pounding – down 36.9% for March and 37.8% for the quarter.
The CBA has already paid its interim and last year paid a final of $2.31 a share. That is in danger.
Westpac paid an interim a year ago of 94 cents (and a final cut to 80 cents), ANZ paid a final of 80 cents a share and an interim of the same amount, but the final was 70% franked. The NAB paid two dividends in 2018-19 of 83 cents each.
We will find out soon because the NAB ANZ, Westpac and Macquarie boards will be considering dividend policy in the next two weeks.
The shares of European banks dropped on Monday after the chief regulator for the region recommended no dividend payments be made until the northern autumn.
In the EU, giants like ING, KBC Group, UniCredit and ABN Amro each withdrew dividend-paying proposals after the ECB called on banks not to pay them through October. ABN Amro also said it expects to report a loss in the first quarter, as it had announced last week a big loss from its clearing arm.
“Capital conserved by refraining from dividend distributions and share buybacks can also be used to support households, small businesses and corporate borrowers and/or to absorb losses on existing exposures to such borrowers,” the ECB said in its statement.
Meanwhile AMP Capital has warned dividends paid by Australian public companies could fall by as much as a third due to the coronavirus outbreak, exceeding the aggregate level seen during the GFC.
“Banks and REITs are the main sectors left to pay large dividends before the end of the financial year. Both sectors will likely cut dividends sharply in second quarter (March to June) due to the knock-on effect of rent and mortgage abatements mean less cash and they will need to keep capital to service their own debts as these sectors carry high debt loads,” AMP’s Australian equities portfolio manager Dermot Ryan wrote this week.
Coupled with the travel and aviation sector, hardest hit at this point from virus disruptions, Mr. Ryan believes frugal dividend policy will likely spread to other sectors.
“We can now see that the consumer impact has spread to retail, media, and gaming. These sectors are unlikely to pay any more dividends this year,” he said.
