ANZ, CBA, NAB and Westpac share prices: the 2021-22 dividend outlook

We examine the highlights from the big four banks' FY20 and Q3 reports, as well as look at what Citibank and Morgan Stanley currently think of the sector.

The share prices of Australia’s big four banks have traded in a mixed fashion over the last month – with the majority trading flat after releasing their third quarter and full-year trading updates in August.

Overall, the banking sector remains under pressure, with interest rates sitting at historic lows, Covid-19 causing economic uncertainty across the country, and the outlook for Australia’s property market – a key driver of bank profitability – also appearing on shaky ground.

Understanding the big four banks' August results in 60 seconds

Turning to the August results releases, while the Commonwealth Bank of Australia reported a robust financial performance in FY20 – declaring a 98 cents per share dividend and impressive volume growth across its lending portfolio – the bank has proven to be the worst performing of the big four over the last month, with its share price falling 7.42% in that period.

By comparison – ANZ, NAB and Westpac have all traded flatly – rising between 1.05-2.52%, in the last month.

The headline results from the banks’ full-year and third quarters are summarised below:

CBA FY20 results:

  • Statutory profits (NPAT) of $9,634 million, up 12.4%
  • Earnings per share (EPS) of 412.5 cents
  • A CET1 ratio of 11.6%
  • A 98 cents per share final dividend

WBC Q3 results:

  • Statutory earnings of $1.12 billion
  • Net interest income (NIMs) of $4,333 million
  • A CET1 ratio of 10.8%
  • The announcement that no interim dividend will be paid

NAB Q3 results:

  • Unaudited statutory net profits of $1.50 billion
  • Revenue growth of 10%
  • ‘Broadly stable’ net interest margins
  • A CET1 ratio of 11.6%

ANZ Q3 results:

  • Statutory profits of $1,327 million
  • A CET1 ratio of 11.3%
  • The announcement of a 25 cents interim dividend

Open an IG demo account to practice trading Australian bank stocks today.

The CBA, Westpac, ANZ, NAB share price and dividend outlook

In the wake of the August earnings season, Citibank reaffirmed their mostly bullish view on the sector, with the investment bank currently rating Westpac as its most preferred bank of the big four – assigning the retail-focused bank a Buy rating; followed by NAB (Buy); ANZ (Buy); and CBA (Neutral).

Across the regionals, Citi currently favours the Bank of Queensland over the Bendigo and Adelaide Bank, rating it a Buy.

‘Valuations remain attractive, but key test for the sector comes in 4QCY20,’ Citi analysts said.

In spite of that value-oriented stance, with uncertainty still plaguing the sector and the economy more broadly, the investment bank pointed out that in the ‘absence of notable credit impairments as well as varied approaches to provisioning by the banks, the Market is left with no better insight into the impact of COVID-19.’

Morgan Stanley, by comparison to Citi, has taken a more bearish view on Australia’s banks, in a recent piece of research arguing that:

‘We believe risk will remain skewed to the downside until there is more certainty on credit quality, capital requirements and dividend payout ratios, and this looks unlikely before 2021.’

Morgan Stanley’s share price targets and FY21 and FY22 dividend estimates for the big four banks are displayed in the table below:

Bank

Price target

FY21 Dividend

FY22 Dividend

ANZ

$20.00

100 cps

120 cps

CBA

$62.00

315 cps

345 cps

Westpac

$17.40

100 cps

115 cps

NAB

$17.50

85 cps

105 cps

How to trade the big four – long or short

What do you make of these recent developments: are you bullish or bearish on the big fours’ prospects? Whatever your view, you can trade the likes of ANZ, CBA, Westpac and NAB – long or short – using IG’s world-class trading platform now.

For example, to buy (long) or sell (short) CBA using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘CBA’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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