UBS: Aussie banks mull “artificial dividends”

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Via the excellent Jonathon Mott at UBS:

Two steps forward… one big step back?

With Melbourne moving to Level 4 lockdown (all non-essential businesses closed), the outlook for the Australian economy and banks has deteriorated sharply. After a strong economic bounce from May until early July, this is a clear setback. While the assumptions underpinning the banks’ overlays in their March results looked relatively conservative, this may no longer be the case, especially in Victoria. We still expect lower credit impairment charges with the June Results/Updates (from 12th Aug, see Figure 1) given limited new NPL formation as a result of loan deferrals, however banks are likely to be rewarded for provisioning prudence in this environment.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.