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.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

More on Bank Shares

A woman wearing a yellow shirt smiles as she checks her phone.
Bank Shares

$5,000 in CBA shares at the start of 2025 is now worth…

Has Australia's largest bank delivered the goods for investors this year?

Read more »

Construction worker in hard hat pumps fist in front of high-rise buildings.
Resources Shares

Why this fundie is backing ASX mining shares over banks in 2026

Wilson Asset Management lead portfolio manager Matthew Haupt explains his views.

Read more »

Higher interest rates written on a yellow sign.
Broker Notes

How will interest rate hikes impact the big four ASX banks like CBA shares?

If the RBA hikes interest rates in 2026, what will that mean for ANZ, Westpac, NAB, and CBA shares?

Read more »

Bank building in a financial district.
Bank Shares

Why is everyone talking about NAB shares on Friday?

NAB shares are grabbing ASX investor interest today. But why?

Read more »

Happy young woman saving money in a piggy bank.
Bank Shares

Down 20% since November, are Bendigo Bank shares now a buy?

A leading investment expert delivers his outlook for Bendigo Bank shares.

Read more »

Woman holding $50 and $20 notes.
Bank Shares

$5,000 invested in Westpac shares at the start of 2025 is now worth….

The big 4 bank's shares have tumbled over the past month.

Read more »

Woman with money on the table and looking upwards.
Bank Shares

The CBA share price has fallen 19% since June, is it a buy?

Is this the right time to invest in the bank?

Read more »

Three small children reach up to hold a toy rocket high above their heads in a green field with a blue sky above them.
Bank Shares

Up 22% in a year! The red-hot ANZ share price is smashing CBA, Westpac and NAB shares

Why has the ANZ share price risen so much this year?

Read more »