At time of writing, the share price of National Australia Bank Ltd [ASX:NAB] is trading at $24.905, down 3.7%.
It’s been a tough year for NAB, trading downwards since the establishment of the Banking Royal Commission:
Today, recently announced new rules for the bank have been weighing on the mind of investors.
APRA announces new capital requirements hurting NAB’s share price
Australia’s banking regulator, the Australian Prudential Regulation Authority (APRA) has announced that Australian banks would need to keep more cash on hand.
The new capital requirements will require the big four banks, Commonwealth Bank of Australia [ASX:CBA], Australia and New Zealand Banking Group [ASX:ANZ], and Westpac Banking Corporation [ASX:WBC], to raise their available capital 4-5% by 2023.
The current ratio stands at 14.5%.
Announcement hints that NAB may have to cut dividends
NAB’s share price fell as they traded ex-dividend but even adding back the value of the dividend they were still trading lower, while the other Big Four banks gained 1.3-1.5%.
The ex-dividend date is usually set two business days out from the dividend record date, and shares typically fall on this day.
Australia’s fourth largest bank, NAB announced in response to the new capital requirements that it would need to increase capital by up to $19 billion over the next four years.
The bank said it was on track to meet existing capital requirements ahead of a 2020 deadline.
But some investors may be concerned that dividends will be cut to raise the necessary funds.
This is because as Reuters notes, ‘NAB has been running behind its peers in meeting existing minimum capital requirements.’
This comparative measure looms as the primary reason NAB’s share price is down compared to the other Big Four Banks today.