Is Westpac Banking Corp (ASX: WBC) going to cancel its dividend in the upcoming half-year result?
It could go either way at this point. Australia and New Zealand Banking Group (ASX: ANZ) has decided to entirely defer its dividend decision to a later date. National Australia Bank Ltd (ASX: NAB) decided to cut its interim dividend by 64%.
Is Westpac going to cancel its dividend?
That's the big question for income investors isn't it? Westpac has already announced a number of impairment and provision charges that are going to hit the bank. It recently announced impairments are expected to be $2.24 billion.
That figure includes $0.6 billion from individually assessed provisions and net write-offs together with around $1.6 billion of additional impairment charges mainly relating to coronavirus impacts.
There are predictions everywhere of GDP declines, higher unemployment, less investments and falling property prices. This is obviously going to affect Westpac. It could be a lot worse than initially provisioned by Westpac.
Don't forget, it's not just the coronavirus that's going to hit the earnings result next week. There's a $1 billion provision for AUSTRAC, $260 million for remediation and a few other smaller write-downs.
The Westpac Board showed in FY19 they're willing to take tough decisions in regards to the dividend. This decision is a lot tougher.
The CET1 ratio at 31 March 2020 is expected to be 10.8%. This compared to NAB that had a CET1 ratio of 10.39% at the end of last quarter. Its financial position is better than NAB's was prior to the capital raising.
Foolish takeaway
I thought all the banks would pay a dividend if NAB decided to because it was the first mover. But ANZ's move surprised me. I'm not sure which way Westpac will go. Westpac is better capitalised than NAB but it also faces bigger non-coronavirus problems as well as potentially larger bad debts.
I wouldn't want to buy Westpac shares with so much uncertainty around.
