(Photo: REUTERS/Staff/File Photo)
Shares of the Australian "Big Four" lenders dropped on Wednesday, following a recommendation from the regulator that banks and insurers seriously consider "delaying payouts" for dividends before the effects of the coronavirus pandemic becomes more apparent.
The finance institutions, three of which are due to announce dividend decisions in addition to the April 30 interim 2020 earnings, have earned considerable capital flexibility from the regulator and are seen to comply to its request.
Therefore, as per the request of the regulator, analysts said the four lenders would either delay payout decisions or slash dividends to rates which would pass a 'stressed' scenario.
Yet the Australian Prudential Regulation Authority has stopped short of issuing an official directive, even as central banks worldwide have restricted plans to return capital to creditors as the epidemic threatens earnings and disrupts operations.
APRA has asked the major lenders and insurers to restrict discretionary distributions of capital so that they have adequate capability to carry on critical functions such as loan and insurance underwriting.
In this moment of major disruption caused by the pandemic, banks and insurers have a vital role in helping Australian households, enterprises and the wider economy, the regulator said in a letter to the industry.
The Big Four banking groups are the Commonwealth Bank of Australia, National Australia Bank, Westpac Banking Corp, and Australia and New Zealand Banking Group. Shares of these lenders were down from 4 percent to 6 percent.
In the stock market, the S&P/ASX 200 Index was off shape on Wednesday and fell deeper. The benchmark index was down 5,206.8 points by 0.84 percent.
On Thursday the S&P/ASX 200 index was poised to rise higher to 47 points, or 0.9 percent at the open, according to the latest SPI futures. The Dow Jones climbed 3.4 percent on Wall Street, the S&P 500 rose 3.4 percent, and the Nasdaq rallied 2.5 percent.
In reaction to the statement from the regulator, Westpac bared that it has yet to come out with a decision on its interim dividend, while the National Australia Bank stated it would take APRA guidance into consideration while looking into its first half year dividend.
Bank of Queensland Ltd, Australia's ninth largest bank, posted 10 percent lower than the previous year's interim cash earnings on Wednesday and announced it would delay its dividend until the economic outlook is clearer.
Meanwhile, hot on the heels of a Fitch Ratings rating upgrade, S&P Global Ratings has updated Australia's credit rating outlook to "negative" with a corresponding effect on the key lenders' credit rating forecast.
