The Motley Fool

Why New Zealand could cause the share prices of big 4 ASX banks like ANZ to fall

The share prices of Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB and Westpac Banking Corp (ASX: WBC) could face further share price declines because of New Zealand.

According to reporting by Bloomberg, New Zealand’s central bank, the Reserve Bank of New Zealand (RBNZ), will announce this week how much capital it expects New Zealand banks to hold to be able to weather a severe economic shock to the local and global economy.

The big ASX banks are considering whether they should sell or shrink their New Zealand operations if the RBNZ decides to increase the amount of Tier 1 to 16%, which is a high percentage even compared to the level that APRA wants.

If NAB, ANZ and the others have to increase their capital levels then it would undoubtedly add pressure on the banks’ profitability and dividends. Bloomberg quoted Tim Roche, Fitch Rating’s head of Australia and New Zealand financial institutions:

“There is general pressure on profitability across the board right now, with slow credit growth, low interest rates and increased scrutiny impacting fee income.”

Macquarie Group Ltd (ASX: MQG) analysts have estimated that each of Westpac, NAB and ANZ would need to add between $4 billion to $5 billion to meet the new requirements. However, CBA apparently has enough capital.

Foolish takeaway

It makes it even harder for the banks to maintain their dividends and profits if they have to hold more capital. In a once-in-a-generation event more capital would make the system safer, but in all of the years that there isn’t a crash it would reduce the profitability.

I don’t want to buy bank shares, I’d much rather buy these dividend shares for my portfolio instead.

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 Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have 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 2.7% 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.