Major banks' dividend payout ratios to drop to ~50%

Christopher Joye

Coolabah Capital

In The AFR today I project the major banks will be eventually forced to slash their dividend payout ratios in response to continued requirements to build core equity capital. One silver lining is that Bloomberg is reporting that systematically important banks will only have to hold 16% "total loss absorbing capacity" (TLAC) by 2019, which is much lower than the 18% to 22% war-story the market had assumed. This is significant for the major banks because they don't typically rank well on a TLAC basis. The not-so-good news is that the major banks' leverage ratios look very ordinary on a global basis and APRA has three times this year highlighted this fact. Following recent meetings with regulators and central banks, JCP Investment Partners' head of financials research, Matt Wilson, said "there was a clear consensus that total bank payout ratios will have to settle around 50% compared to the 70%-80% levels in Australia". Citi and Morgan Stanley have both recently cut forecasts for the major banks' dividend payout ratios with more likely to follow. Read for free: (VIEW LINK)


Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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