Assuming the lack of a bad debt apocalypse, the big banks certainly look cheap. But the smaller banks look even cheaper, which suggests there’s better value at the minnow end which is more oriented to mortgages than business lending.
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.
Eftpos provider Tyro Payments has withdrawn the guidance in its prospectus while Bank of Queensland has also scrapped its 2019-20 earnings guidance but maintains that its capital position and funding are strong after a recent $340 million capital raising.
Bank of Queensland's first half result missed the broker on slower revenues and higher expenses. As the broker had expected, following APRA's directive, the bank has deferred its interim dividend. On the expectation of increased loan impairments, the broker cuts FY earnings forecasts by -12%.
Morgan Stanley envisages ongoing challenges for the bank's retail network because of weak mortgage loan growth, downward pressure on margins and the need for significant investment. Another dividend reduction is probable if profitability continues to fall.