ANZ Bank Sacrifices ‘Holy Cow’ With Dividend Cut
Australia & New Zealand Banking Group Ltd., the nation's fourth-largest lender, will cut its dividend for the first time since the 1991 recession to preserve cash as swelling bad debts squeeze profit, Bloomberg reported.
ANZ will reduce its payout by about 25 percent after net income fell 11 percent from a year earlier to around A$1.2 billion ($777 million) in the four months ended January, the Melbourne-based bank said. It set aside as much as A$2.5 billion for bad loans in the fiscal full year that ends Sept. 30.
"Banks are assuming the brace position for turbulence ahead," said Prasad Patkar, who helps manage A$1 billion at Sydney-based Platypus Asset Management. "Bank dividend was the holy cow that many thought would not be touched because of the retail shareholders who put a high value on dividend income."
ANZ is the first of Australia's four biggest banks to say it will cut its dividend to preserve capital. The decision follows Moody's Investors Service's announcement last week that it is reviewing the credit ratings of Australian banks as the nation's economy slows more than previously forecast.
Chief Executive Officer Mike Smith has cut more than 800 jobs and sold government-backed debt to protect the bank's balance sheet and maintain profitability.
Larger Westpac Banking Corp., Commonwealth Bank of Australia and National Australia Bank Ltd. all said this month profit growth is slowing as bad debts climb. They have avoided the losses posted by global competitors including Citigroup Inc.