CBA – Citi rates the stock as Buy

Citi does not expect APRA to follow the RBNZ’s lead in suspending bank dividend payments, as too many self-funded retirees rely on that income with the cash rate at 0.25%. The regulator has indeed flagged an opposite capital approach — easing the timing on “unquestionably strong” levels in the face of the crisis.

The broker nevertheless believes the banks were preparing for dividend cuts in the second half as bad debts mount, but may now pull those forward to the first half given the loss of NZ dividends. To that end the broker has cut dividend assumptions by -10-18% for ANZ Bank, National Bank and Westpac.

Buy and $68.75 target retained for Commonwealth Bank. No change to dividend forecasts.

Sector: Banks.

Target price is $68.75.Current Price is $61.19. Difference: $7.56 – (brackets indicate current price is over target). If CBA meets the Citi target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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