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ASX 200 drops 0.2%, APRA boosts big 4 ASX banks

The S&P/ASX 200 Index (ASX: XJO) fell by 0.23% today to 6,006 points.

Queensland is racing to contact trace cases after three people tested positive there for COVID-19. Two people had avoided quarantine and gave “misleading information” about visiting COVID-19 hotspots after flying to Brisbane from Melbourne via Sydney.

APRA’s boost for big four ASX banks

The share prices of the big four ASX banks all rose today.

Australia and New Zealand Banking Group (ASX: ANZ) saw its share price rise around 2%.

The Commonwealth Bank of Australia (ASX: CBA) share price went up 1%.

The share price of National Australia Bank Ltd (ASX: NAB) rose by 1.6%.

Finally, the Westpac Banking Corp (ASX: WBC) share price increased by 1.25%.

APRA issued a letter today to banks today with uncertainty in the economic outlook somewhat reducing since the last dividend recommendation earlier this year.

The regulator has been reviewing the banks’ financial projections.

APRA has asked the ASX 200 banks to retain at least half of their earnings when making decisions on capital distributions, as well as utilising dividend re-investment plans and other initiatives to offset the reduction of capital from distributions where possible.

ASX 200 banks are also being asked to conduct regular stress testing. APRA wants banks to make use of capital buffers to absorb the impacts of financial stress, and continue to lend to support households and businesses.

APRA chair Wayne Byres said: “Today’s announcement strikes a balance in recognising the strength of the financial system, while at the same time acknowledging the difficult path ahead…. In the current environment, banks face additional challenges to their capital resilience, including the material volume of loan repayment deferrals (which are subject at present to regulatory concessions), greater financial impact from COVID-19, and restrictions on dividends from their New Zealand operations.”

AGM update boosts AP Eagers Ltd (ASX: APE)

The AP Eagers share price zoomed 13% higher after giving an update at its annual general meeting (AGM).

The ASX 200 car dealership company said that it has been optimising its existing business due to COVID-19 and has managed to deliver a permanent cost reduction of approximately $78 million per annum. Part of this was achieved when it cut its headcount and reduced its fixed monthly cost base by approximately $6 million a few months ago.

In the AGM update the company said that its corporate debt net of cash decreased to $7.6 million at 30 June 2020, down from $315.8 million at 31 December 2019.

AP Eagers expects underlying operating profit from continuing operations to be around $40.3 million, which would represent a 23.6% decline from the prior corresponding period.

Rio Tinto Ltd (ASX: RIO) half year result

One of the ASX 200’s biggest miners reported its half-year result to June 2020 this afternoon after the market had shut.

Net cash generated from operating activities fell 12% to US$5.6 billion and free cashflow dropped 28% to US$2.8 billion.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 6% to US$9.64 billion and underlying earnings per share (EPS) dropped 3%.

Rio Tinto’s board has declared a dividend of US$1.55 per share, an increase of 3% from last time. Net debt increased by almost US$1.2 billion over the six months to 30 June 2020.

The ASX 200 company reconfirmed its 2020 production guidance across all of its commodities.

Rio Tinto CEO J-S Jacques said: “We have been agile and adapted our way of working, to deliver another resilient performance while navigating the new and ongoing challenges and dealing with COVID-19.

“Our world-class portfolio of high-quality assets and our strong balance sheet consistently serve us well in all market conditions and particularly in turbulent times. This, together with our disciplined capital allocation, underpins our ability to sustain production, increase our investment in the business, pay taxes and royalties to governments and continue delivering superior returns to shareholders.”

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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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