Outcomes from the recent Financial Systems Inquiry interim report indicate that bank dividends will come under pressure

Outcomes from the recent Financial Systems Inquiry interim report indicate that bank dividends will come under pressure. For many years we have seen Australian banks increasing their payout ratios to meet the demands of dividend hungry investors. However, outcomes from the Financial Systems Inquiry suggest that The Big Four are not as well capitalised as commonly thought when compared to international counterparts. There have been calls from regional banks to level the playing field which may see the major banks needing to hold more capital against their mortgage books. So what does this mean? Our financials analyst, Omkar Joshi , says he expects to see a leveling out of the playing field between major and regional banks. The implications are that the dividend growth many investors have enjoyed in recent years will now be constrained. Omkar explains why he sees more headwinds than tailwinds for the banks: