CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

ANZ, CBA, Westpac and NAB shares: what’s the dividend outlook?

As volatility and low rates weigh on the share prices of ANZ, CBA, NAB and Westpac, questions over potential dividend cuts have begun to emerge.

As rates fall to historic lows and market volatility across the globe flares, the big four banks have seen their share prices come under pressure in recent times.

In the last five trading sessions the Commonwealth Bank of Australia (ASX: CBA) share price has fallen 3%, the Australia and New Zealand Banking (ASX: ANZ) share price has dropped 4%, the National Australia Bank (ASX: NAB) share price has slid 5% and Westpac Banking Corporation (ASX: WBC) share price has stumbled 3%.

Adding to this short-term turmoil, whispers have cycled through the market that the banks might be forced at some point to cut their dividends – or at the very least to hold them flat – as costs from the Royal Commission persist and tighter capital requirements emerge.

NAB was a front-runner in this regard, having already made such adjustments to their dividend earlier in 2019.

Banks under pressure, pressure

For one, the Reserve Bank of New Zealand (RBNZ) is currently in the process of determining the CET1 ratios required by banks operating in New Zealand. For reference, in Australia, APRA has set an ‘unquestionably strong’ CET1 ratio of 10.5%.

Yet the RBNZ looks poised to take such requirements a few steps further, with a consultation paper from the Reserve Bank suggesting a CET1 minimum of 14.5%. The final requirements are expected to be announced in November.

Ultimately, such a move would increase the capital requirements for the big four’s operations in New Zealand significantly – as well as put pressure on their growth prospects.

With all this considered, below we take a look at what recent research from the banking giant Morgan Stanley suggests about the dividend outlook for the big four.

ANZ share price: dividend in jeopardy?

Morgan Stanley expects a 10% cut to ANZ's dividend in the 2020 fiscal year, which would bring the bank’s payout ratio closer to historical levels.

Centrally, with potentially higher capital requirements in New Zealand, the investment bank has also suggested that ANZ may have to cede market share in New Zealand as a means of lowering its CET1 capital requirements.

The investment bank also commented that it believes that ANZ (ASX: ANZ) will not initiate any share buy backs in the near-term.

Even when considering this, Morgan Stanley has upgraded their rating from underweight to equal-weight on ANZ and set a price target of A$26.00 on the bank.

NAB share price: dividends to remain flat

With NAB (ASX: NAB) cutting its dividend by some 16% back in May, Morgan Stanley believes it is likely that the NAB dividend will remain flat, with a capital build overtime also looking to be likely.

Overall, the investment bank currently has an ‘underweight’ rating and a price target of A$25.60 on the National Australia Bank.

CBA share price: new opportunities arise

Morgan Stanley seems somewhat optimistic about the Commonwealth Bank of Australia's prospects, though it remains 3rd on the investment bank's list of perferred big four stocks.

Indeed, while the investment bank expects CBA’s dividend to remain flat, it sees a potential A$2 billion share buy-back on the cards.

When compared to ANZ, CBA actually has potential to grow its New Zealand loan book and market share, given the bank’s strong capital position. Even so, Morgan Stanley has a price target of just A$70.00 on the biggest of the big four, which, at today’s price levels would equate to around a 9% share price decline.

Westpac shares: are cuts coming?

On Morgan Stanley’s own estimates, Westpac has the potential to be hit the worst in percentage terms, with the investment bank expecting a 15% dividend cut during WBC’s 2019 second-half results.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research 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 and quarterly summary.

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

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

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.