Westpac, ANZ, CBA and NAB share prices: will 6% dividends return?

As normalcy returns to Australia and markets continue to rally, APRA’s Chair warned that it is ‘dangerously naïve’ to think things will just ‘go back to normal.'

ANZ, CBA, NAB and WBC share prices bounce, healthcare stocks fall behind

Over the last couple of weeks we have witnessed a distinct rotation from growth into value: ASX-listed financial, energy and real estate equities have all outperformed in that period, while utilities, healthcare and staples have lagged.

Australia’s big four banks, which long-failed to participate in the recent ‘recovery rally’ – were particular standouts. Between Monday 25 May to Friday 29 May: ANZ saw its share price rise 14.75%, Westpac gained 12.33%, NAB added 13.08%, while CBA lagged its big four peers, rising just 8.07% in that period.

The banks continued to rise when markets opened on Monday.

Besides a rotation from growth to value, general positive trends within Australia’s economy look to have helped boost sentiment around financial stocks.

Some of these developments include the government’s $60 billion Jobkeeper reporting error and the prospect of a potential multibillion stimulus scheme for the country’s residential construction industry. For example, Scott Morrison today hinted that ‘households may get cash grants for home renovations,’ according to SBS.

On that first example though, Citi analysts made the point that should the government make use of this ‘saved’ $60 billion to further stimulate the economy, that it would ‘further insulate the economy and balance sheets from stress later in the year.’

The dividend outlook

Though those stand as positive developments for Australia’s economy in sum – APRA’s Chair Wayne Byres, last week flagged the need to be realistic – saying:

‘The idea that we’ll employ some temporary measures and then everything will “go back to normal” is therefore a dangerously naïve one on which to base our decisions. Flexibility and agility will be important – we have a long battle ahead.’

Speaking of that long battle – and the tangible impact it may have on banks and bank investors – Citibank postulated that:

‘Should further Government assistance be put in place to either extend JobKeeper or target specific industries, this will provide relief to loan defaults and asset prices. With CET1 of ~11.5% for the sector and ample buffers to absorb base case RWA migration, the sector should be put back on the path to resuming dividends.’

On a more granular level, Citi analysts argued that when the banks do resume paying dividends, ‘the market would likely price them on 5-6% dividend yields,’ implying further upside for bank share prices.

Overall, of the big four banks, Citibank’s most preferred is the National Australia Bank (NAB), while the firm’s least preferred bank is the Commonwealth Bank of Australia (CBA).

How to trade bank stocks

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

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

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘ANZ’ 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

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