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The RBA says ASX banks can pay dividends

cash piggy bank

The Reserve Bank of Australia (RBA) governor Dr Lowe has said that ASX banks are strong enough to pay dividends in the upcoming results.

The ASX investment world has been trying to figure out what the big ASX banks of Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) will do with their dividends.

Has APRA and Reserve Bank of New Zealand (RBNZ) forced the banks to consider significantly cutting their payments?

Will the banks completely suspend the dividend until this coronavirus crisis is over?

RBA’s Philip Lowe encourages bank dividend payments

According to quotes from the Australian Financial Review, the RBA is encouraging of banks reducing their dividends but at the same time Dr Lowe would be comfortable with the banks still paying dividends:

“They’re certainly going to cut back dividends, which I think is entirely appropriate. You have got to remember that Australia’s banks have very high levels of capital. We’ve undertaken extensive stress testing. In all those stress tests, they have maintained well capitalised. They have the ability to pay dividends and some Australians rely on those dividends for their income.”

Banks in the UK, Europe and New Zealand have been banned from paying dividends during this period. When commenting on bans for Australian banks, Dr Lowe said:

“[There is] a balance to be struck, and by cutting back dividends from where they were over the past couple of years, I think we’re moving in the right direction to strike the right balance. But I don’t think they need to be banned.”

Foolish takeaway

This is good news for bank shareholders. Australia seems better placed to get through the coronavirus impacts compared to other countries, both healthcare wise and financially.

Despite this positive news, I think some other shares would be worth buying for total returns over the banks.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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