Coronavirus: Another sign the ASX banks will probably cut dividends

Coronavirus: The ASX banks are likely to cut their dividends. Here's another sign it's going to happen.

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There's another sign that the ASX banks are likely to cut their dividends.

I'm thinking that all the domestic ASX bank dividends from Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ), Bank of Queensland Limited (ASX: BOQ), Suncorp Group Ltd (ASX: SUN) and Bendigo and Adelaide Bank Ltd (ASX: BEN) are in danger.

What's the sign?

In the UK, the deputy governor of the Bank of England had written to some UK bank bosses asking them to suspend paying dividends.

Banks like Lloyds, Barclays, Royal Bank of Scotland, Standard Chartered and HSBC were going to pay billions of pounds to shareholders.

But now they're going to keep those funds so that the money will support the economy through 2020.

The Bank of England said it didn't expect the money to be needed because they have enough money in reserve.

How does this affect ASX banks?

Well, obviously the UK isn't Australia. But there's already been a lot of talk that the banks will have to cut their dividends due to the enormous economic disruption caused by the coronavirus.

I'm sure there are already plenty of borrower requests for payment holidays from the banks.

Today the AFR is reporting that companies low on cash have asked the Treasurer to issue protections against banks if they default.

How can banks generate a profit if borrowers aren't currently paying their loans? They can't. It would be very unwise to be paying out dividends from cash you need to be holding onto to weather this pandemic storm. Banks don't want to doing ultra cheap capital raisings. 

I just think that dividend cuts from the banks are inevitable in 2020. Hopefully they can bounce back in 2021. But it could be a tough road ahead.

Motley Fool contributor Tristan Harrison 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.

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