Australian Banks May Return $16 Billion In Excess Capital To Shareholders

Post by NeilMc on September 3, 2009 · Under Australian Economy, Business News, Capital Markets, Equities, banking, investments · Comment

Shareholders in Australia’s major banking groups could have as much as $16 billion in excess capital held by the lenders, returned to them over the next year according to investment bank Credit Suisse.

Credit Suisse also says that bad debt will peak in the second half of 2009 almost a year earlier than it had previously estimated.

The reduction in real actual levels of bad debts, and falling provisions, will free up even more capital, increasing already conservative cash levels held by the banks.

The Australian banking majors are already outperforming international rivals, and according to Credit Suisse banking analyst James Ellis, as the Australian economy continues to recover, the level of bad debt is unlikely to rise any further.

“There is not going to be a sharp snap back. We now expect bad debts to peak in the second half of this year, primarily reflecting the more buoyant recent economist data as well as positive forward indicators from the recent bank results. We also expect bad debt charges will experience a sharp downward trajectory post the peak on the back of progressive progression releases.” Mr. Ellis said.

Credit Suisse believes that the probability of the Big Four banks returning the excess capital to shareholders has risen, and the amount given back, either through a special dividend or share buy back, may be as high as $16 billion.

CBA and Westpac were the banks most likely to pay a special dividend.

The Big Four lenders are amongst the highest rated and best capitalised banks in the world with all four majors holding the closely watched tier-one capital ratios in excess of the benchmark 8 per cent.

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