Summary: If Westpac’s amount of shares on issue grows faster than its profit, some other lever must be pulled for the bank to maintain or grow its dividend. The market consensus is for dividend growth to continue at all four of the big banks, which creates significant downside risk. I am concerned about the pressure on bank profits and the trend of increased risk aversion and regulatory response.
Key take-out: It may not be time just yet to sell the banks but they should be under scrutiny. If half an investor’s portfolio is in the big four banks then diversification is a problem.