Are CBA (ASX: CBA) shareholders about to get hit like NAB (ASX: NAB)?
What is CBA?
CBA is Australia’s largest bank, with commanding market share of mortgages (24%), credit cards (27%) and personal lending markets. It has 16.1 million customers, 14.1 million are in Australia. It is entrenched in the Australian payments ecosystem and financial marketplace.
What happened with NAB?
Today, NAB announced that it is going to raise around $3.5 billion in a capital raising. The raising discount is at a 8.5% discount to the last closing price. It also announced a large dividend cut for the interim payment to shareholders to 30 cents per share.
Does CBA face the same fate?
Australia’s biggest bank is generally seen as a higher quality, safer bank than NAB, Westpac (ASX: WBC) and ANZ (ASX: ANZ).
CBA is/was one of the most capitalised banks in the world. That means its balance sheet is stronger and it’s less likely to need to raise capital. Its dividend also has a slightly better chance of being cut less because of its more conservative attitude. But I do think that a dividend cut is coming.
APRA has asked the major ASX banks to materially reduce their dividends so that they remain well capitalised during this period. The Reserve Bank of New Zealand (RBNZ) has also banned banks from paying dividends.
It seems like a dividend cut is likely, but I think CBA is the least likely to do a capital raising. Why hold all that capital if you’re still going to do a capital raising?
Even so, I believe these technology shares could create stronger long term returns than CBA due to its size (and other factors):
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
