The most important news last week was the Commonwealth Bank’s move to increase its interim dividend by 1c to 199c per share. While the increase in itself was immaterial, it signaled that the Bank believes that it has enough capital and won’t need to undertake a further dilutive capital raising.
Of course, the Bank said it was all about maintaining a dividend payout ratio at 70%, but in an environment where most analysts have been forecasting reducing dividends, any action to increase the dividend, however small, was a big statement.
And it came less than a week after APRA Chairman, Wayne Byres, said in a prepared speech that “the main policy item on our agenda in 2017…is to set capital standards so that the capital ratios of our deposit-takers are ‘unquestionably strong’…We will have more to say in the coming months about how we propose to give effect to the concept of unquestionably strong”. He went on to say that “The major banks have added in the order of 150 basis points to their CET1 ratios over the past couple of years. Assuming the industry continues to steadily build its capital, we expect it will be well placed to respond to future policy changes in an orderly manner.”