Today marks the third consecutive day of gains for Australia’s largest bank.
Enthusiasm around the CBA gathered yesterday when the bank updated the market of the impacts of its divestments and financial reporting changes.
Investment banker eyes return in dividends
Broker Morgan Stanley today said they are forecasting a 155 cents interim dividend at CBA’s upcoming first-half result.
With the brokerage firm devising its first-half dividend estimate after forecasting a full-year payout of 330 cents based on a payout ratio of around 72%.
Although this is still below the 80%-plus payout ratios that the big banks dished out to shareholders in 2019.
Morgan Stanley commented:
‘We believe strong capital and provisioning, the Australian economy’s “resilient re-opening” and the lifting of APRA’s dividend restrictions provide CBA with a number of capital management options.’
While 155 cents is still shy of the 200-cent interim dividend paid in 2020, Morgan Stanley say the final dividend could build on this foundation.
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‘There has historically been a first-half/second-half skew of around 45% to 55% in the full year dividend and we think that skew will resume this year.
‘More importantly, we believe CBA should consider using its surplus capital to support a higher medium-term payout ratio rather than undertaking buybacks.’
The prospect of a buyback is a little more difficult to predict.
Having now completed divestment in BoCommLife to MS&AD Insurance Group Holdings Inc and agreeing to merge Aussie Home Loans with Lendi, the bank may find itself in a strong capital position.
Whether or not repurchasing shares will be a priority when other banks have focused on investment in their services is a wait and see type of game.
Does this mean other banks will follow suit?
In my opinion, some of the other banks could follow CBA and lift their dividends significantly this year.
With ANZ also in a strong capital position after a series of divestments and an ongoing simplification of its service, it could also be a front-runner for a solid dividend payout.
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