April 29, 2019 / 2:52 AM / 25 days ago

CORRECTED (OFFICIAL)-PREVIEW-Australian bank earnings under pressure as reporting season looms

(Corrects release of CBA quarterly release date to May 13, not May 8 in 7th par)

* Analysts see weak revenue trends in Big Four reporting season

* NAB expected to cut dividends by 10 pct to 20 pct

* Westpac forecast to post 17 pct drop in half-year profit

By Paulina Duran

SYDNEY, April 29 (Reuters) - National Australia Bank is expected to cut its dividend this week for the first time in a decade, a sign of how things have changed for the scandal-hit sector as credit demand and the economy slow and regulators apply stricter oversight.

Analysts polled by Reuters are expecting the “Big Four” lenders to show weak revenue trends and rising costs when reporting season begins from Wednesday, driven by billions of dollars in remediation for wronged customers.

“I’m expecting to see subdued loan growth and therefore subdued revenue growth,” Azib Khan, senior banking analyst at stockbroker Morgans, told Reuters.

Westpac Banking Corp is expected to post a 17 percent decline in half-year profit, its steepest in seven years, to A$3.5 billion ($2.5 billion) when it reports on May 6, as a sharp increase in regulatory and remediation charges hit the bottom line.

Australia and New Zealand Banking Group is forecast to show a 1.7 percent decline in cash profit to A$3.39 billion on Wednesday, according to analysts polled by Reuters.

“Fee-income across the industry is also under pressure,” Khan said.

Commonwealth Bank of Australia, the largest of the four majors, posted a weaker than expected first-half profit in February and is due to release quarterly earnings on May 13.

Despite the steepest fall in property prices in a generation, analysts expect bad-debt charges to have remained low given the banks have not flagged any major deteriorations in asset quality on their loan books.

Housing credit growth has slowed to a record annual low of 4.2 percent, and analysts expect that to fall further as the property downturn plays out and banks tighten loan controls.

The tougher home-loan market comes as the major lenders are dealing with the consequences of a year-long public inquiry into the financial sector that exposed widespread misconduct, including instances of cash bribes paid to win mortgage business and fees charged to the accounts of dead customers.

REMEDIATION COSTS

NAB is expected to post an 8.8 percent increase in cash earnings for the first half of the year to A$3.0 billion - still, not enough to reverse earlier double-digit falls in earnings.

High remediation and regulatory costs continue to undermine NAB’s plans to automate parts of its business, to the point that analysts now expect it will be forced to cut its interim dividend for the first time since 2009.

Australia’s fourth-largest lender has not cut its interim dividend since 2009, and has been held at 99 cents since 2014.

Expected increases to its A$1.1 billion in remediation provisions and higher regulatory capital requirements in New Zealand are pressuring NAB’s core capital, and analysts are now factoring in a dividend cut of 10 percent to 20 percent.

Australian banks have already accounted for over A$6 billion in remediation costs and refunds, but analysts expect this reporting season might uncover one last chunk of possible liabilities related to illegally charging fees without providing services.

“Potential refunds related to self-employed advisers is the last known big outstanding issue,” Khan said.

“Once they’ve set aside provisions for their aligned financial advisers, it looks like the bulk of the remediation provisions would be out of the way.” ($1 = 1.4178 Australian dollars) (Reporting by Paulina Duran; Editing by Stephen Coates)

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