Westpac has joined its smaller rival in Bendigo and Adelaide in dropping dividend for the 2019-20 financial year.
After Westpac suspended its interim dividend in May, the board decided it is prudent not to pay a first-half dividend at all, as the bank faces a highly uncertain outlook due to the coronavirus pandemic.
Westpac paid dividends of $1.74 a share in 2018-19, down from $1.88 a share the year before. The cut came in the final a year ago which was trimmed to 80 cents a share from 94 cents a share.
Shareholders were not happy, the shares down more than 2.3% at the close to $17.18
The early decision to nix the dividend was despite Westpac not ruling off its accounts for the 2019-20 year until September 30.
The bank’s board would not have decided on the level of a payout to shareholders until late October/early November, once the results had been worked out and an assessment of the coming year completed.
But the impact of the pandemic, high provisions for possible bad debts and the uncertain outlook has seen the bank’s board (led by the new chair, John Macfarlane) and CEO, Peter King decided to take a conservative stance.
Also helping make the decision was the view of key regulator, APRA, which while it has eased its bad on payouts by banks and insurers, has told boards to think carefully about capital management.
News of the dropping of the final payout came in a third-quarter trading update yesterday and a cash profit of $1.32 billion.
The country’s second-largest bank reported a statutory unaudited net profit of $1.12 billion for the third quarter of 2020.
Westpac said the rise was due to lower impairment charges incurred compared with the previous quarter. Impairment charges for the third quarter were $826 million.
Westpac said in the update that its unaudited profits during the June quarter were 19% higher than the first half quarterly average, mainly due to lower charges for bad loans.
CEO Peter King said COVID was clearly affecting the business, pointing to lower profit margins, weaker activity, and loans that have been deferred by customers.
“Westpac’s priority has been to remain strong so we can continue supporting customers through this challenging period,” Mr. King said.
“We have maintained our strong balance sheet and increased provisions for bad debts to support our prudent approach to managing impairments.”
