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Westpac halts trading to launch $2.5bn capital raising

The big four bank has sought $2.5 billion in funds to build a buffer against “uncertainty” over capital rules, litigation and regulatory action.

Westpac Group’s shares were placed in a trading halt on Monday (4 November) to facilitate a placement worth approximately $2.5 billion in capital.

The capital raising consists of a fully underwritten $2 billion institutional share placement and a non-underwritten share purchase plan targeted at raising $500 million in funds.

According to Westpac, the capital raise is designed to provide an increased buffer above the Australian Prudential Regulation Authority’s (APRA) unquestionably strong Common Equity Tier 1 (CET1) capital ratio benchmark of 10.5 per cent.

The bank added that the raising would also create “flexibility for changes in capital rules”, and for “potential litigation or regulatory action”.

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Commenting on the announcement following the release of Westpac’s full-year financial results (FY19), CEO Brian Hartzer said: “Weve been ahead of the unquestionably strong benchmark through the whole year, we finished at 10.7 per cent, but we always prioritise strength at Westpac and there is a level of uncertainty around capital rules, etc. 

“We felt it was prudent at this point in time to give ourselves a bit more of a buffer.”

He added: “We are well ahead of the unquestionably strong benchmark, but we want to have a bit of a buffer to make sure we're not at risk.”

The share offering is expected to add approximately 46 to 58 basis points to Westpac’s Level 2 CET1 capital ratio.

The placement will be undertaken at a fixed price of $25.32 per share, representing a:

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  • 5 per cent discount to the adjusted last close price on ASX of $27.08 on 1 November 2019; and
  • 1 per cent discount to the adjusted five-day VWAP on ASX of $27.56 to the close of trade on 1 November 2019.

According to Westpac, the share placement would result in approximately 79 million new shares being issued, representing approximately 2.3 per cent of Westpac’s total issued capital.

New shares under the placement are expected to settle on 7 November, with new shares to be issued, and commence trading on the ASX on 8 November.

Westpac resumed trading on the ASX this morning.  

[Related: Heritage eyes 30% growth in business banking]

Westpac halts trading to launch $2.5bn capital raising
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