Investment Banking MC

‘Credit crunch’ would hit bank dividends: UBS

Posted by Anton Murray Consulting on . Posted in Investment Banking MC


In a research note on the Australian banking sector, UBS analyst Jonathan Mott laid out a ‘credit crunch’ scenario under which the banks would be forced to cut dividends. Tightening credit conditions and negative sentiment are already causing the Australian housing market to slow following a prolonged boom in Sydney and Melbourne, said Mr Mott. Other factors that have UBS concerned are the royal commission’s “rigorous interpretation” of the responsible lending laws, APRA’s focus on sound lending practices, and the Labor Party’s pledge to limit negative gearing should it win the next federal election.

“Given these headwinds we expect a sharp slowdown in credit growth. Whether this turns into a more disorderly correction, or if there are any potential political interventions remains to be seen,” said Mr Mott. The question will be, he said, whether banks can maintain their dividends. If there is an orderly slowdown in the housing market, the banks should be able to generate enough capital to maintain dividends, Mr Mott said.

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