* Telstra at near 7-year low

* NAB hits 1-1/2 year low, trades ex-div

* Fletcher hits highest in 12 weeks on being retained in MSCI

By Susan Mathew

May 15 (Reuters) – Australian shares were lower on Tuesday as one of its major banks went ex-dividend, while phone giant Telstra extended losses after issuing a profit warning the previous day.

The S&P/ASX 200 index was 21.8 points, or 0.4 percent, lower at 6,114.2 by 0232 GMT. The benchmark rose 0.3 percent on Monday.

National Australia Bank was the biggest drag on the index, down 3 percent, as its traded ex-dividend while the other three of the ‘Big 4’ were among the biggest boost to the index, up between 0.3 percent and 0.7 percent.

The finiancial sector, especially the banks, have been under intense pressure recently after a powerful inquiry revealed widespread misconduct.

Shares of Telstra extended losses and hit their lowest in nearly 7 years, down as much as 3.6 percent, after it said its expects fiscal 2018 earnings to be at the lower end of guidance. The firm warned that challenges may continue into 2019 as competition rises with the roll out of National Broadband Network.

Mining giants BHP and Rio Tinto remained buoyed supported by strength in the underlying commodities, mainly iron ore.

Separately, minutes of RBA’s May meeting showed that it saw little reason to lift interest rates as inflation remained below target and likely to remain subdued in the face of sluggish wage growth.

Damien Hennessy, co-founder of Heuristic Investment Systems expects some modest improvement in wages growth from the last quarter’s number, but nothing that will change RBA’s outlook the for cash rate.

“In an environment where bond yields here are remaining low and cash rates to remain on hold, its not an altogether bad backdrop for the Australian equity market.”

New Zealand’s benchmark S&P/NZX 50 index was up 0.1 percent, or 11.46 points at a record-high 8,724.69.

Fletcher Building led gains, rising 4.1 percent to its highest in over 2-1/2-months. MSCI’s semi-annual review showed that Fletcher will remain part of the MSCI main index.

Ryman Healthcare scaled a record high, rising 2.5 percent.

For more individual stocks activity click on