CommBank's surprise packet
The Age
Monday February 8, 2010
THE Commonwealth Bank's army of small shareholders are likely to be rewarded with their first increase in the interim dividend for two years despite the board's insistence it could no longer guarantee higher payouts.The first-half dividend is expected to be raised by as much as 23 a share when CommBank reports a much improved net profit of $2.9 billion for the six months to December 31, 2009, on Wednesday.After a tough 18 months in the wake of the financial crisis, the country's biggest bank by market capitalisation will underline the health of the banking industry with a 45 per cent increase in post-tax earnings, worth an extra $900 million in cash terms.Having held its last half-year pay-out to investors at the December 2007 level of $1.13 a share, CommBank is forecast to lift its latest dividend to $1.36 €” a rise of 20 per cent.The difference in percentage terms between the boost to its bottom line and the reward received by shareholders will reflect the need of the bank to cover a huge increase in its equity base following the multibillion-dollar capital raisings it has undertaken.CommBank has harvested around $5 billion in additional capital since late December 2008 as it took advantage of market conditions to buy BankWest and reduce the impact of rising bad debts on its balance sheet.But these moves added at least 100 million shares to its equity base, meaning that its existing dividend payments €” equal to an average of 74 per cent of its net profits being paid out to shareholders in recent years €” have had to go round further.According to the last annual report released in September, the bank had on issue 1.51 billion shares of which just over half €” 797 million €” were held by investors owning between one share and 100,000.The biggest group, around 179,000 shareholders, hold parcels of between 1000 and 5000 shares representing 24 per cent of its total issued capital. In contrast, institutional shareholders and major fund managers own 720 million shares or 47 per cent of the total.They have worn not only dividend freezes over the past 18 months but also the first cut in at least two decades when the bank reduced its final, second half payout by 38 cents from its June 2008 distribution of $1.53 a share to the $1.15 payment last June.That coincided with a 7 per cent fall in the group net annual profits for its 2009 financial year to $4.4 billion and the decision to reduce the final dividend by 25 per cent.At the time of its interim dividend payout, chairman John Schubert also warned that the bank could not guarantee to maintain dividends "at past levels". But the recovery in earnings, underlined by the profit upgrade released last month, will allow the previous upward trajectory in payouts to be resumed.Analysts at Deutsche Bank and UBS are tipping a $1.36 a share interim dividend to be declared on Wednesday, with the size of the total cash payout worth just over $2 billion, or 69 per cent of the bottom-line profit.
© 2010 The Age
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