Australia’s largest mortgage lender has today revealed it will raise additional capital after posting a record $9.1 billion profit.
Following its big four peers, CBA today revealed the bank will raise capital to meet future requirements, including the change to average mortgage risk weights for Australian residential mortgages announced by APRA last month.
CBA will offer entitlements to ordinary shares pro rata to all eligible shareholders, which can be exercised to buy one new share for every 23 shares held on the record date for the offer at an offer price of $71.50 per new share.
This represents a 10.5 per cent discount to the dividend-adjusted closing price on the ASX on 11 August 2015.
Eligible retail shareholders who do not exercise, sell or transfer their entitlements will have their entitlements sold on their behalf through a bookbuild process and any sale proceeds will be paid to them. The offer will be fully underwritten to raise approximately $5 billion.
Approximately 71 million new fully-paid CBA ordinary shares will be issued (approximately 4.3 per cent of shares on issue). Following the capital raising, the group’s pro forma CET1 ratio will be 14.3 per cent on an internationally comparable basis (which assumes full implementation of the Basel III reforms), and 10.4 per cent on an APRA basis.
CBA shares are in a trading halt ahead of the deal.
Chief executive Ian Narev said that maintaining a flexible and strong balance sheet, including a strong capital position, continues to be a strategic focus for the bank.
"We now have greater certainty regarding the key requirements of global relativity and mortgage risk weights," Mr Narev said.
"Our announcement today strengthens our position in response to those requirements. This will provide us with ongoing flexibility so we can continue to support our customers."
Last week, ANZ raised $3 billion to meet its CET1 capital ratio requirements. The move follows NAB’s $5.5 billion capital raising in May. Westpac also raised $2 billion in May through its dividend reinvestment plan.