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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Blowout in loan losses to hit bank dividends

Posted by on in ROYAL COMMISSION URGENT
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Blowout in loan losses to hit bank dividends

The Australian 12:00am April 24, 2019

Richard Gluyas

 

The catalyst for a cut in major-bank dividends was likely to be a blowout in loan losses rather than any increase in capital requirements or spike in remediation and compliance costs, according to investment bank Citi.

Citi said in a report yesterday that investors were “unnecessarily concerned” about high bank dividend payout ratios.

While payout ratios were indeed high, the banks were likely to absorb one-off costs, although National Australia Bank was facing another tough decision about its dividend when it reported its first-half result on May 2.

“Our base case (for the industry) assumes flat dividends,” Citi analyst Brendan Sproules said.

“Low risk-weighted asset growth will continue to enable high payout ratios while delivering neutral capital outcomes, and the absence of a pick-up in risk-weighted asset growth will allow boards to look through one-offs and manage tight capital positions.”

The swing factor, though, was likely to be a turn in the credit cycle, as mild events tended to have a significant impact.

A “mild” scenario in which losses peaked at 60 basis points of gross — compared with the 80 basis-point peak in the global ­financial crisis — would result in dividend cuts of 30 per cent for Commonwealth Bank, Westpac and National Australia Bank.

ANZ would have to slash its dividend by only 15 per cent.

Weakening capital adequacy would also need to be offset by banks making a call on shareholders.

Westpac and NAB were likely to raise $1 billion-$3bn, while ANZ and CBA would have to run down their surplus holdings of capital by a similar amount.

Historically, the major banks have cut dividends only when loans were turning sour.

ANZ, for example, slashed its dividend in the early 1990s recession, as well as in 2009 and 2016.

Mr Sproules, however, said he expected the current credit cycle to “bounce along the bottom”.

NAB was in a different category, facing another period in which its payout ratio would exceed 90 per cent.

The reason was last week’s announcement that remediation costs would reduce first-half cash earnings by $325 million and $200m for discontinued businesses.

The board previously faced the same issue in the second half of 2014, the second half of 2015, and both halves in 2018.

On each of those occasions, ­directors decided to hold the dividend and look through the one-offs.

“(But) in the midst of a leadership transition, the NAB board might take a different approach,” Mr Sproules said.

Bell Potter analyst TS Lim forecast in a note that NAB would cut its interim dividend from 99c to 90c.

This would translate to a 75 per cent underlying cash payout ratio compared with the board’s target of 70-75 per cent.

“This is further deck-clearing by acting chief executive Phil Chronican, consistent with our view that he will do as much as possible to not distract the incoming and permanent CEO,” Mr Lim said.

Bell Potter upgraded its NAB recommendation to “buy”, taking comfort from the speed of the program to de-risk the bank and shore up its capital position.

It said hard decisions were being made to ensure earnings were more consistent in the ­future, which should further improve the market’s perception of the lender.

Citi’s Mr Sproules also downplayed the threat to the sector from the Reserve Bank of New Zealand’s review of its bank capital framework.

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