APRA has announced that it has eased dividend restrictions for Authorised Deposit-Taking Institutions (ADIs). It expects ADI's to retain at least half of their earnings, and actively use dividend reinvestment plans (DRPs) and/or other capital management Initiatives to at least partially offset the diminution in capital from distributions.

Morgans now forecasts FY20 dividends to be 45% of FY20 forecast statutory NPAT for all of the Australian banks under their coverage. The FY21 dividend forecasts for the banks also equate to 45% of the broker's FY21 forecast statutory NPAT,  that is the analyst assumes that dividend restrictions will continue in FY21, but not in FY22.

The broker expects all banks under coverage to operate DRPs with no price discount.

As a result, Morgans now expects ANZ Bank to declare a deferred interim dividend of $0.25cps (70% franked) as part of its scheduled 3Q20 trading update on August 19.

No change to rating or price target.

Sector: Banks.

Target price is $21.00.Current Price is $18.09. Difference: $2.91 - (brackets indicate current price is over target). If ANZ meets the Morgans target it will return approximately 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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