ANZ became the second bank to defer a dividend payment, when it announced yesterday that the board would wait until it had a clearer picture of the scope of the economic contraction. It has scheduled an update in August, when it might be able to say whether it will pay a March half dividend or not.
Bank of Queensland deferred its dividend earlier this month, saying that if it does pay a dividend it will be below the bank’s target payout ratio of 70 to 80 per cent of earnings.
The Australian Prudential Regulation Authority has told the bank it expects them to limit discretionary capital distributions, including dividends, “in the months ahead” to ensure they maintain capacity to continue lending.
APRA wants ADIs to use stress testing to inform their views about their need to preserve capital.
“During this period, APRA expects that ADIs and insurers will seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer,” the regulator said.
ANZ chief executive Shayne Elliott said the bank’s board had not set any specific variables that would determine whether or not the dividend would be paid.
“What we are saying is that this crisis only hit six weeks ago. We are right in the heat of this,” Elliott said.
“We will know more in August about the economy, about our customers and about government and regulatory approaches.
“I can’t give an assurance that we will pay a dividend. It is all about the forward outlook for the business and our capital strength.”
Elliott said the bank had no plans to use its capital buffer and operate with a common equity tier 1 capital ratio below 10.5 per cent. However, the bank would allow for the possibility as a short-term measure.
Asked if the bank could pay a dividend if it went into the buffer, he said there was no black and white rule. “It would depend on our plans and what our expectations are for generating capital,” he said.