I'm not even sure where to start to be honest as there is so many things to understand.
Essentially capital ratios are made up of several components. The most important one is the Prudential capital ratio (PCR). For the big 4 banks the CET1 PCR is 4.5% which means if their capital ratios drop that low then they are in serious trouble and could topple. To ensure that banks never reach that level there are "buffers" that go on top. That includes Capital Conservation Buffer (CCB), "unquestionably strong" buffer, CCyB buffer (currently set at 0) and a management buffer.
Latest NAB CET1 buffer sits at 10.39%, which is 5.89% away from PCR. In monetary terms that is a buffer about $16 billion. NAB is adding an extra $3.5 billion on top of that and the dividend cut represents another $1.6 billion.
I think it's important to stress that NAB's changes to it's capital distribution (cap raise and divies) is extremely normal because when COVID-19 is over, the banks still need to adhere to the prudent capital ratios. Capital raise and divvie cuts are not a sign that the banks are about to fall over. Far from it. If you look at facts and avoid the noise by posters with no banking knowledge then you'll understand that there is close to a zero chance banks will fall over and this analysis doesn't even take into consideration that the Government would step in in the 11th hour if it were to eventuate.
APT Price at posting:
$27.74 Sentiment: Hold Disclosure: Held
