ANZ plans A$3 billion share raising to meet capital rules

Australia & New Zealand Banking Group is raising $3.05 billion in capital following moves by regulators to make Australian banks safer.
Australia & New Zealand Banking Group is raising $3.05 billion in capital following moves by regulators to make Australian banks safer. PHOTO: BLOOMBERG

SYDNEY (BLOOMBERG) - Australia & New Zealand Banking Group is raising A$3 billion (S$3.05 billion) in capital following moves by regulators to make Australian banks safer, taking equity issuances by the country's largest lenders to the highest since the global financial crisis.

ANZ will sell shares worth A$2.5 billion to institutions in a range above an underwritten floor price of A$30.95 per share, and raise another A$500 million through an offering to shareholders, it said in a regulatory filing. Unaudited cash profit rose 4.3 per cent to A$5.4 billion in the nine months ended June 30 with bad debt charges increasing, it said.

The raising "will allow ANZ to more quickly and efficiently accommodate additional capital requirements recently announced by the Australian Prudential Regulation Authority," the bank said. The raising will add about 78 basis points to the lender's common equity Tier 1 capital ratio, taking the measure to 9.3 per cent, it said.

Australia's banking regulator last month raised the average capital that the country's four main lenders need to hold against potential home loan losses. It also said the banks would need to add 200 basis points of capital to be considered among the world's safest.

"Over the next couple of years we were expecting a capital raise of as much as A$7 billion at ANZ," David Ellis, a Sydney-based analyst at Morningstar Inc. said by phone. "The balance can be met by asset sales and dividend reinvestment plans."

About A$8 billion of capital raisings have already been announced this year by the country's largest lenders. That's the most in any year since 2008, when the four lenders amassed almost A$13 billion, data compiled by Bloomberg show.

National Australia Bank sold shares worth A$5.5 billion in the country's biggest rights issue earlier this year, while Westpac Banking raised A$2 billion and ANZ garnered about A$480 million through a dividend reinvestment plan, where investors swap all or part of their dividends for new shares. Commonwealth Bank of Australia, the largest lender in the country, is the only major bank yet to announce any capital raising plans this year. It reports full-year earnings Aug. 12.

ANZ, which is scheduled to report unaudited results Aug. 18 for the nine months ended June 30, said bad debt charges climbed 13 per cent to A$877 million due to changes in risk weights in resources and agricultural lending.

largely because of bad debt charges,'' Morninstar's Ellis said. "We were expecting a A$1 billion annual bad debt charge, it looks like it will be A$1.2 billion. We will cut our 2015 and maybe 2016 profit forecast accordingly."