Australian banks jump as Bell Potter gives "buy" call on hopes of big dividends

Dec 16 (Reuters) - Shares of Australian banks jumped on Wednesday after financial advisory firm Bell Potter placed a “buy” rating on all four of the country’s top lenders for the first time since the global financial crisis of 2007-08.

The brokerage’s buy call comes after the Australian Prudential Regulation Authority (APRA) said on Tuesday that from next year banks need not hold a portion of their profit back, giving the green signal to higher dividends.

Commonwealth Bank of Australia rose to a near 10-month peak, while shares of Australia and New Zealand Banking Group, Westpac, and National Australia Bank were set for their best session since Nov. 25.

Australian banks had been asked to limit paying dividends to less than half their profit in early 2020, in a bid to help banks preserve capital and weather higher loan defaults as well as thinner margins due to the economic blow from the COVID-19 pandemic.

However, the economic outlook has improved since its guidance in July as infections were brought under control, leading the regulator to loosen rules around dividend payouts.

Citi Research said the Australian banking regulator’s move to lift limits on bank dividend payouts could lead to capital return as early as February when CBA reports its first half 2021 results.

Citi said a combination of slower asset growth, recovering profits, lower dividends, and sale of non-core businesses this year will contribute to a substantial build in banks’ CET1 over the next three years.

The increased bullishness around the sector following APRA’s announcement lifted the S&P/ASX 200 Financials index to a near three-week high. (Reporting by Nikhil Subba in Bengaluru; Editing by Arun Koyyur)