Australian banks' capital raisings surpass crisis after CBA

[SYDNEY] Commonwealth Bank of Australia is planning a A$5 billion (S$5.1 billion) rights offer that will take capital raising by the nation's biggest banks this year to levels surpassing the global financial crisis.

In response to stricter regulatory requirements - put in place partly to buttress lenders against a possible slump in the country's booming property market - the bank and its three largest rivals have now revealed plans to raise A$16 billion this year. That exceeds the A$13 billion raised to bolster balance sheets in the aftermath of the 2008 financial crisis.

The banking regulator has increased the average capital the banks need to hold against potential home-loan losses. The Australian Prudential Regulation Authority also said they would need to add 200 basis points of capital to be considered among the world's safest.

"CBA needed to boost capital to match its peers," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

National Australia Bank Ltd. sold shares worth A$5.5 billion in the country's biggest rights issue earlier this year, while Westpac Banking Corp raised A$2 billion.

Australia & New Zealand Banking Group Ltd. is raising A$3 billion after garnering about A$480 million earlier this year through a dividend reinvestment plan, where investors swap all or part of their dividends for new shares.

Commonwealth Bank shareholders can buy one share for every 23 they own at A$71.50 each, or a 13 per cent discount to Tuesday's closing price, it said in a statement Wednesday. The Sydney-based lender also reported cash profit, which excludes one-time items, for the six months ended June 30 of A$4.5 billion, a 2 per cent increase from a year earlier.

The bank's stock, which has been halted for the rights offer, declined 4.1 this year through Tuesday, compared with the benchmark S&P/ASX 200 index's 1.2 per cent gain.

ANZ shares lost 0.4 per cent and Westpac dropped 0.3 per cent, while National Australia sank 0.8 per cent as of 1:29 pm in Sydney on Wednesday. The ASX 200 index fell 1 per cent.

Commonwealth Bank said the capital raising will boost its common equity Tier 1 ratio, a measure of its ability to absorb future losses, to 10.4 per cent compared with 9.1 per cent as of June 30.

ANZ said last week that its ratio will rise to 9.3 per cent after its capital raising, while National Australia said Monday its level stood at 9.94 per cent as of June. Westpac reports its capital position Aug 17.

"The rights offering puts Commonwealth Bank's capital levels ahead of its main competitors," Brett Le Mesurier, a Sydney-based analyst at BBY Ltd., said by telephone. The company should be able to "sustain these levels with some dividend reinvestment plans." On a conference call with analysts, Commonwealth Bank's Chief Executive Officer Ian Narev refuted speculation of asset sales to bolster capital. The lender may explore a partial sale of its global asset-management unit, the Australian newspaper reported Aug 4, without saying where it got the information.

"I'm aware there has been lot of speculation about what businesses we'd own and what we might not own," Mr Narev said. "There is no divestment there that we are going to contemplate for capital reasons. There's no asset sale programme that is going to be driven by capital requirements."

BLOOMBERG