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Don’t dish out dividends right now, banks told
Banks and insurers are strongly being advised against handing out dividends to investors for “at least the next couple of months”.
Don’t dish out dividends right now, banks told
Banks and insurers are strongly being advised against handing out dividends to investors for “at least the next couple of months”.
The Australian Prudential Regulation Authority (APRA) has said it expects authorised deposit-taking institutions (ADIs) and insurers to limit discretionary capital distributions in the months ahead.
In a letter to relevant institutions, the corporate regulator said this is to ensure they instead use buffers and maintain capacity to continue to lend and underwrite insurance.
Taking into account the current uncertain outlook, and a need to preserve capacity to prioritise these “critical” activities, APRA said “this includes prudent reductions in dividends”.
Over the next few months, APRA said it expects ADIs and insurers to “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer”.
Even where a Bard is confident they would be able to approve a dividend before this – where they have undertaken “robust stress testing” and discussed this with APRA – “this should nevertheless be at a materially reduced level”.
At the time of writing, Westpac was the first big four bank to acknowledge the letter.
It indicated that no decision has yet been made by the Westpac board in relation to the 1H20 dividend, with a decision to be announced alongside the bank’s 1H20 results on 4 May 2020.
Macquarie Bank has also made a statement.
It said it will work through the details of APRA’s recommendations as the bank’s board considers final FY20 dividend amounts.
Meanwhile, Bank of Queensland (BOQ) said it has determined “that it is prudent to defer the decision on payment of an interim dividend until the economic outlook is clearer and stress testing results have been discussed with APRA”.
Commenting on the bank’s decision, chairman Patrick Allaway said “BOQ understands the impact of this decision on shareholders, however also acknowledges this guidance as a prudent step for the industry”.
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