Why the Big Four Banks may be about to slash their dividends

‘Dividends will likely be cut by ~18%, starting in August 2020 with CBA and other three Major Banks in November 2020,’ noted Citi analysts.

Australia’s long-standing love affair with bank dividends looks set to sour, with Citibank expecting the big four banks will soon start slashing dividends as a result of the coronavirus (Covid-19) pandemic.

As investors seek safety ‘no matter the cost’, equity markets across the globe have been sold-off sharply. To illustrate that point on a local level, in the last month the CBA share price has fallen 35.22%, ANZ has collapsed 44.65%, while NAB and Westpac have fallen 46.88% and 43.10%, respectively.

As a silver lining of this carnage, Citibank this week upgraded its ratings on all of Australia's big four and regional banks to a Buy recommendation.

And though the investment bank has also lowered its price targets on all of the big four banks in response to the current Covid-19 situation; as the below table illustrates – at current price levels – Citi’s estimates imply high levels of upside potential.


Share price

Citi price target

Implied upside









National Australia Bank




Commonwealth Bank




How to trade the big four banks

Where do you stand: is this another case of an investment bank being overly bullish or is Citibank on the right track here? Trade accordingly. You can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

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

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘ANZ’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

CBA, ANZ, Westpac and NAB share prices: the outlook

In light of this sector re-rating, Citi has ranked ANZ as its most preferred bank, citing its ‘exposure to high grade corporates with better resilience in the shutdown, as well as better leverage to widening asset spreads in the recovery,’ as key positive factors.

Looking at the broader implications the coronavirus, Citi notes that it expects bank net interest margins to continue to fall before rising as commercial asset spreads widen; earnings are also anticipated to drop off modestly across FY20 and FY21; and impaired assets and bad debts will likely rise across the sector.

‘The shock to business and household cashflow that will be caused by a shutdown of economic activity is likely to be unprecedented. Businesses will need to reduce staff, with this process already beginning. Households will need to have access to finance to draw upon, as well as reduce their savings, as many will be without a wage or salary over the next 6-12 months,’ Citi said.

As a result of all this, the investment bank’s base case is not only a significant cut to earnings in FY20 and FY21, but a likely reduction to the Big Four's all important dividend payments.

‘We expect dividends to cut by 18% at ANZ to $1.30, cut by 15% at CBA to $3.65, cut by 10% at NAB to $1.50 and finally cut by 18% at WBC to $1.30.'

There are some positives mind you, not only does Citi expect no further dividend cuts after that, but it expects bank profits to stage a sharp bounce-back in FY22, estimated to rise ~17% in that period.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.