It's probably pretty fair to say that the vast majority of ASX investors who buy ASX bank shares do so for the dividend income potential. The big four banks, in particular, have traditionally funded some of the largest dividends in the upper echelons of the S&P/ASX 200 Index (ASX: XJO). And have done for several decades now.
Even today, the likes of ANZ Group Holdings Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) offer dividend yields of more than 6% and 7% respectively.
That's more than those said banks offer with their own savings accounts and term deposits. So it would come as no surprise to see income-hungry investors hold onto their ASX bank shares as we head into 2024.
However, those investors might be a little jaded in a few years' time if new analysis from Macquarie is to be believed.
According to reporting in The Australian today, Macquarie analysts have predicted in a note to investors that banks are about to face a tough time.
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Are the ASX bank shares about to cut their dividends?
Those analysts warn that bank earnings are "expected to decline by 5 to 15 per cent in the 2024 financial year".
The only reason why the banks were able to maintain, or even grow their payouts over 2023 was, according to these analysts, "an unwind of capital buffers".
This unwinding is predicted to "deliver a 35-45 basis points increase in capital returns to investors in 2024-25".
Saying that, the analysts have warned investors that " we see it as just a matter of time before dividends will need to be cut".
Here are some more of their thoughts:
While we see scope to utilise surplus capital in the near term for NAB [National Australia Bank (ASX: NAB)] and WBC, we continue to believe their payout ratios are not sustainable and expect a dividend cut in FY26…
The key potential upside is from better than expected earnings growth which may be supported by ongoing cyclically low impairment changes staying at current levels for longer than we expect.
Obviously, this would be bad news for ASX income investors who are relying on the banks for that historically fat dividend income. But the financial landscape is notoriously difficult to anticipate. So who knows what it will be like in FY2026?
At the present time, ANZ shares lead to the big four with a trailing yield of 7.1%. Commonwealth Bank of Australia (ASX: CBA), meanwhile, remains the laggard in terms of ASX 200 bank dividends with its 4.21% yield today.
