ANZ Bank may have to hasten the sale of its stakes in several Asian lenders to sustain dividends as the nation’s fastest-growing bank burns capital ahead of new regulations.
“If ANZ is to be considered an Asian growth play it cannot continue to overpay dividends to the detriment of its capital strength.” UBS analyst Jonathan Mott said.
Boosted by better results from Asia, ANZ this week reported an 11 per cent rise in cash profit to 3.5 billion USD for the six months to March 31 and handed shareholders a higher than expected 83c dividend.
ANZ, which has grown total lending at a faster rate than any of the other major banks in the past year, aims to pay 65-70 per cent of profits to shareholders.
The big four banks must have capital ratios of at least 8 per cent by 2016 after recently being deemed “domestic systemically important banks”, with ANZ targeting 8.5-9 per cent.
Mr. Mott said ANZ was facing a “conundrum” of how it would fund a pick-up in business credit growth or deal with losses from an economic slowdown, forcing the bank to consider selling its Asian “partnerships” to release capital.
He said ANZ would also struggle to hit its target to lift the return on equity to 16 per cent by 2016.
ANZ owns minority stakes in a range of banks in Asia, such as Indonesia’s PT Bank and China’s Bank of Tianjin.
ANZ chief Mike Smith this week reiterated that he was not wedded to the investments in Asian banks, which have become less profitable amid stricter regulations since the global financial crisis.
But he said the bank was in “no big hurry” to sell its 14 per cent stake in Bank of Tianjin, and would make a decision when the bank was floated on an exchange.
CLSA analyst Brian Johnson said ANZ’s 65-70 per cent dividend payout was already below the 70-75 per cent of its major bank peers and its capacity to fully frank payouts was “constrained” due to its earnings from Asia and New Zealand.
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ANZ Bank may have to hasten the sale of its stakes in several Asian lenders to sustain dividends as the nation’s fastest-growing bank burns capital ahead of new regulations.
