Investors will soon be diving into a big pool of dividends next month as three of the big four banks hand in their full-year results.
The market is yet to get excited about the wall of dividends with the share price of Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) slipping 0.3% and 0.1%, respectively, at the time of writing, although Westpac Banking Corp (ASX: WBC) has managed to claw its way back to trade 0.8% higher ahead of the market close.
While there are some concerns that the three banks may have to lower their final dividends in the face of intense earnings pressure, the three are still likely to throw around $8 billion in payments to shareholders in November.
If you included franking credits, eligible shareholders could be sharing a dividend pie that's closer to $12 billion in value.
Commonwealth Bank of Australia (ASX: CBA) has already reported its results and paid a final dividend.
The more significant question is whether the reporting season will mark a turnaround in the embattled sector, which is the worst performer on the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index over the last year.
It's hard to believe that financials have fared even worse than telecommunications given the big crash in Telstra Corporation Ltd's (ASX: TLS) share price, but at least Telstra and its peers didn't have to face a bruising Royal Commission.
Some experts believe we will get a turnaround next month as so much bad news is already in the share prices of the banks. All the banks need to do is to reassure the market that things aren't getting any worse and that they have turned a corner.
I am certainly not ruling out the potential for a relief rally in the near-term, but I am not sure that it will be the re-rating event that bank supporters are hoping for.
For one, we still do not know what Commissioner Kenneth Hayne will recommend when he hands in his final report early next year.
New regulations for the sector seem unlikely but existing laws and oversight will almost definitely be beefed up.
The bigger unknown in my view is the health of our housing market. Experts are still downgrading their outlook and forecast for the sector with Morgan Stanley and NAB the latest to take a more bearish view our residential market (click here for more details).
I don't think we need to wait for our housing market to return to growth before jumping back into the banks, but as I've said before, we should at least wait for a deceleration in house price declines before turning bullish on the banking sector.
We may need to wait until sometime in 2019 for that.
