by Chris Becker
Oh noes! Please don’t cut the dividend – wait, don’t cut the growth in dividends even!
Following CBA’s annual report and subsequent downgrades from a swathe of analysts and investment houses, the finance sector is suffering a selloff today, dragging the ASX200 (of which it comprises over half its weighting) down over 1% just after lunch:
CBA is down 2% to just under $76 per share, while ANZ, NAB and WBC are down 1.6%, 1.3% and a whopping 3.6% as the latter reports a “small increase in stressed assets”
Texture from YF:
“partly due to higher mortgage delinquencies in WA, SA and Queensland.
The lender says the rise in mortgage repayments more than 90 days overdue and an increase in assets on its watchlist had pushed its stressed exposures for the three months to June 30 up to 1.15 per cent of total exposures. The figure was 1.03 per cent in the previous quarter.
The increase in watchlist and substandard assets to $1.4 billion reflected stress in the New Zealand dairy industry and challenges facing some business customers in mining-related regions.
Not anything to really write home about, similar to CBA’s uptick in bad debts and commercial exposure particularly, but its enough to upset the apple cart that is the dividend gravy trains from the protected golden goose that is Megabank.
Because to cover any of these bad and doubtful debts means paper thin capital needs to be retained even further, hampering the increasingly deliquent method of paying out the majority of profits in dividends. CBA has paused their payout ratio at an astonishingly high 77%, up from the ca. 55% from the GFC “cautious” period:
Watch this space as the rest of the banking sector sneaks out its updates, because if any real cuts to dividends occur, the golden goose will be feathered by the market.