Some of the world’s fattest bank dividends are at risk as Australia’s four dominant banks, which together raised a record amount of equity capital last year, come under pressure to add more amid a potential rise in bad debts.
…“There’s certainly more capital raisings to come from the banks this year,” Sean Fenton, who helps oversee $1.7 billion as portfolio manager at Sydney-based Tribeca Investment Partners, said. “While the lenders will try to maintain the illusion of dividends and issue more stock along the way to boost capital, increasing capital and increasing bad debts at the same time can put pressure on dividends.”
This month, Goldman Sachs Group Inc. predicted “a gradual decline” in the payout ratio for the banks, while Morgan Stanley forecast a dividend cut by ANZ as the lender comes under pressure to boost capital. Lowering dividends would allow banks to rely less on selling new shares to beef up their buffers.
And none of these guys is predicting any kind of economic shock.