The dividends paid by Australia’s big banks are too high, and the most obvious response to a likely toughening in capital rules would be for banks to cut payouts to shareholders, Perpetual portfolio manager Anthony Aboud says.
The Big Four’s record of paying juicy dividends has made them a hit with retail investors, but a new note from Mr Aboud argues the lenders are materially over-paying dividends and investors should not assume this will continue.
As regulators increase capital requirements for banks in coming years, he argues the banks are saving too little for a “rainy day”, and all except ANZ Bank also eating into their capital bases through current dividend policies.
The views of Mr Aboud, a portfolio manager of the SHARE-PLUS long-short fund, feed into a long-running debate among analysts over the sustainability of big bank dividends, worth about $20 billion a year.
Perpetual did not say whether the fund manager has a “short” position towards the banks – betting on future share price falls.
In the latest half, Commonwealth Bank, National Australia Bank and Westpac kept their payouts flat, while ANZ Bank broke ranks with its rivals when it cut its dividend in May, as it also delivered sharply lower profits due to hefty one-off items.