From Morgan Stanley:
Recent results from the major banks were slightly better than we expected. However, we think EPS and ROE risks remain to the downside and we now forecast dividend cuts at NAB and WBC. We continue to prefer ANZ (OW) and WBC (EW) over CBA (UW) and NAB (UW).
Dividend cuts coming in FY17E: While ANZ has already adopted a “more conservative and sustainable” dividend, the other major banks held 2H16 dividends flat y-o-y despite earnings growth stalling and ROEs falling ~1.5%pt yo-y. Ongoing dividend reinvestment plans are also a drag. We now forecast dividend cuts in FY17E at NAB (~14%) and WBC (~10%),after both paid out >80% in FY16.