APRA has updated its capital management guidance for banks and insurers, saying Australia’s financial system is well positioned to withstand a severe downturn and easing restrictions around paying dividends.
The guidance replaces its recommendation in April this year that banks and insurers “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer”.
“It must be remembered that a 50 per cent payout ratio is substantially lower than the normal bank payout ratio, and with bank profits likely to fall due to bad debt provisions, investors will probably still need to look outside the banks for income,” said Dr Don Hamson, managing director of Plato Investment Management.
“I now encourage the banks to listen to the regulator’s latest guidance and resume paying out a level of dividends that won’t leave investors in the lurch.”
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