Australia's 'Big Four' banks see shares fall after regulator urges dividend deferral

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Commonwealth Bank of Australia (AX:CBA), Westpac Banking Corp (AX:WBC), National Australia Bank Ltd (AX:NAB), and Australia and New Zealand Banking Group Ltd (AX:ANZ) fell by 4.1% to as much as 6.2%, with Westpac falling the most.

The Australian Prudential (LON:PRU) Regulation Authority (APRA) asked banks and insurers to limit discretionary capital distribution so that they have sufficient capacity to continue essential functions such as lending and underwriting insurance.

The regulator said dividends will need to be at a “materially reduced level” even when a board is confident it can approve a dividend before conducting stress tests that will need to be discussed with APRA.

In response to the regulator’s statement, Westpac said it is yet to make a decision regarding its interim dividend, while National Australia Bank said it will take APRA guidance into account when considering its dividend for the first half year.

Australian brokerage Morgans expects the top lenders will suspend the next dividend, saying commentary may describe the move as a deferral until the outlook is clearer. Analysts earlier forecast that the Big Four may cut dividend in coming weeks due to the pandemic.

Separately on Wednesday, the regulator suspended issuing new banking, insurance and superannuation licences for a least six months because of uncertainty created by the virus outbreak.