The Motley Fool

Why the ‘big four’ banks are falling behind global peers

The big four banks have endured a difficult 2019 earnings season across the board.

The 2018 Financial Services Royal Commission and lower interest rates have squeezed the banks’ earnings so far this year.

An article from Bloomberg is saying that it’s not just perception: the big four banks are slipping on the global rankings.

How was FY19 for the big four banks?

Commonwealth Bank of Australia Ltd (ASX: CBA) started the trend back in August, with cash earnings missing expectations.

Commonwealth Bank’s 8% drop on the prior corresponding period (pcp) in full-year profit to $8.6 billion. The bank’s underlying cash profit also missed expectations at $8.5 billion for FY19.

The Commonwealth Bank share price fell lower on the result, as investors also missed out on a special dividend despite the $4.1 billion Colonial First State Global Asset Management sale during the year.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) was the next in line, as it reported higher remediation costs in FY19.

ANZ’s profits slumped 7% to $5.95 billion, largely due to customer remediation after the Royal Commission. The Aussie bank’s repayments since 2017 have hit $1.6 billion and lowered cash earnings.

The Westpac Banking Corporation Ltd (ASX: WBC) crashed lower on Tuesday as it became the next in line to report earnings.

The Aussie bank announced a $2.5 billion equity raising to support as its cash profit fell 15% to $6.85 billion.

Analysts had questioned whether the big four bank could meet its regulatory capital requirements without fresh equity or a dividend cut.

In the end, Westpac did both: raising the $2.5 billion from institutional investors and slashing its final dividend by 15% to 80 cents per share.

Customer remediation hurts NAB earnings

National Australia Bank Ltd (ASX: NAB) was the last bank to report its earnings yesterday.

The NAB share price climbed higher despite slashing its earnings and dividend in its full-year result.

NAB’s cash earnings slumped 10.6% to $5.1 billion as it cut its dividend by 16% to 83 cents per share with customer remediation again the catalyst.

NAB’s remediation bill hit $1.1 billion in FY19 and the bank will be hoping its wealth management spin-off will boost its regulatory capital higher in FY20.

Foolish takeaway

For now, all eyes will turn to FY20 to see if the big four banks can turn around their earnings next year.

Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 147%) and Collins Food (up 105%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!