S&P/ASX 200 Index (ASX: XJO) banks have long been favoured by investors looking for some handy passive income.
But with numerous banks in the United States and Europe under intense selling pressure, just how safe are the big ASX bank stocks?
And for investors hunting for reliable passive income, what's the outlook for the ASX 200 banks' fully franked dividend payouts?
Why are ASX 200 banks at risk?
As you're likely aware, the ongoing global banking crisis was born in the United States with the collapse of Silicon Valley Bank and Signature Bank.
That liquidity crisis quickly spread to Europe, felling Credit Suisse. That bank is set to be taken over by UBS in a controversial deal engineered by the Swiss government. And now even Deutsche Bank has come under short-selling pressure.
With the situation still unfolding, Saxo Markets Australia market strategist Jessica Amir advises caution for investors eyeing ASX 200 bank shares.
"If we do have a banking collapse in the US in the lending part of their market, the fear and hysteria will probably hit our market too – when the US sneezes we catch a cold," Amir said (quoted by The Australian).
"We are telling clients to be quite cautious at the moment," she added. "Bank stocks are quite risky at the moment."
What's the dividend outlook for the big banks?
Shaw and Partners senior investment adviser Jed Richard pointed to the Hayne Royal Commission into the Aussie banking sector and prudent lending practices as helping put ASX 200 banks on safer ground than their international peers.
"There is talk that there is no growth in the banking sector – however, the dividend yield we believe is safe," Richard said. "If you can ride it out for a little while and you get a good dividend yield – mission accomplished."
Catapult Wealth portfolio manager Tim Haselum was cautious about the short-term outlook for ASX 200 banks. But he said their dividends will see them continue to have a spot in Australians' portfolios over the longer term.
According to Haselum (quoted by The Australian):
We think bank profitability and hence the share prices will struggle in the short term, but we are not worried about liquidity or solvency in Australia. Longer-term, as long as Australians continue their love affair of property and investors continue to seek dividends, the big four banks will have a place in portfolios.
Here are the 100% franked dividend yields the big four ASX 200 banks currently trade at:
- Australia and New Zealand Banking Group Ltd (ASX: ANZ) 6.5%
- National Australia Bank Ltd (ASX: NAB) 5.6%
- Westpac Banking Corp (ASX: WBC) 5.9%
- Commonwealth Bank of Australia (ASX: CBA) 4.4%
You can see why passive income investors are likely to continue targeting these blue-chip stocks.
