Australia’s financial services regulator has eased restrictions around dividend payouts by banks and insurers but says they should moderate payments to sustainable levels.
The Australian Prudential Regulation Authority had in April asked banks and insurers to seriously consider deferring dividends until the outlook is clearer, amid the economic impact of the coronavirus-related lockdowns on customers and businesses.
“Uncertainty in the economic outlook has reduced somewhat since then, and APRA has had the opportunity to review banks’ and insurers’ financial projections and stress-testing results,” it said.
The regulator, however, wants the boards of banks and insurers to retain at least half of their earnings when deciding on capital distributions for the remainder of the calendar year.
It also wants them to conduct regular stress testing to demonstrate ongoing lending capacity and continue to lend to support households and businesses.
“Although the environment remains one of heightened risk, we now have a stronger sense of how Australia’s economy and financial institutions are being impacted by COVID-19,” APRA chairman Wayne Byres said.
“Banks and insurers do not need to continue to defer capital distributions, provided they moderate payments to sustainable levels based on robust stress testing, and continue to prioritise supporting their customers and the economy.”
APRA’s announcement could be welcome relief to those seniors who rely on retirement income in the form of dividends from the big banks.
While the Commonwealth Bank completed its interim dividend payments in March, National Australia Bank in April sliced its shareholder payment by two-thirds to 30¢, its lowest since 1993.
ANZ deferred its interim payout that same month and Westpac followed in May.
The Commonwealth will report its full-year results and final dividend on August 19.
NAB, ANZ and Westpac will give a clearer picture of the impact of COVID on their balance sheets towards the end of next month when the release third-quarter results.