Brisbane-based regional bank, Bank of Queensland has become the first Australian financial group to heed the call by the regulator, APRA for a rethink and possible pause on dividends and other capital management moves.
At the same time, global insurer, QBE became the first company to go ahead with a dividend after APRA’s call was issued on Tuesday evening in a letter to all financial groups it regulates.
And the shares of Commonwealth Bank, Westpac, NAB, and ANZ came under pressure on the ASX yesterday in the wake of the APRA statement. Westpac shares fell the most of the big four banks, down 5.4%, to $15.25. The share price fell from $15.50 to $15.25 during the final settlement period.
Commonwealth Bank shares dropped 3.3% to $59.81, ANZ and NAB both fell about 4.9% to $15.52 and $15.35 respectively.
Some analysts expect ANZ Bank, National Australia Bank, and Westpac to freeze dividend payments for the first half, after APRA’s comments on Tuesday.
Fitch Ratings to cut its credit rating for the major Australian banks, as it warned of rising bad debts and pressure on profits from low-interest rates.
The global credit ratings agency on Tuesday night downgraded the big four banks to A+, from AA-, with a “negative” outlook, as it predicted that government policies would not fully cushion the economy from the hit of the virus.
The downgrade came before Fitch was aware if the dividend warning from APRA.
S&P also put some Australian banks on a negative outlook from a stable setting. It left the CBA’s rating at AA.
These moves and the falls in the banks helped push the wider market lower yesterday at one stage, but it then bounced back to be up more than 1% at the close.
Westpac, which balanced its half-year on March 31, said it is yet to make a decision regarding its interim dividend, while the NAB, which also balanced on March 31 said it will take APRA guidance into account when considering its dividend for the first half-year.
QBE said in a short statement to the ASX before trading opened yesterday that its board “has carefully considered APRA’s new guidelines regarding the payment of dividends by financial institutions in the currently volatile COVID-19 economic environment.
“Following due consideration, the Board is satisfied that it is appropriate to pay the Group’s 2019 final dividend of 27 Australian cents per share on Thursday, 9 April 2020 as scheduled.”
Bank of Queensland (BOQ) though took a very different tack in its interim results. It said it would defer a decision on paying its interim dividend until the economic outlook was clearer.
Chairman Patrick Allaway said the bank understood the impact of its decision on shareholders but APRA’s guidance was a prudent step while CEO, George Frazis said management would talk to APRA before deciding whether to pay shareholders.
BOQ reported a 10% fall in cash earnings to $151 million for the first half of 2020.
Revenue was flat at $545 million for the six months to February 29, while expenses jumped 31% to $377 million, including $47 million in non-recurring expenses associated with its strategic review and restructure.
Statutory net profit slumped 40% to $93 million.