Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter

Westpac needs to raise $3 billion in capital: Morningstar

Morningstar estimates that Westpac needs to raise about $3 billion in capital before 1 July 2016 to boost its CET1 ratio closer to the ‘new normal’ of 10 per cent.

In a research note this week, Morningstar analyst David Ellis said that each of the four major lenders need a CET1 ratio near 10 per cent to be ranked in the top quartile of global peers based on APRA’s conservative calculation.

“To achieve a 10 per cent CET1 ratio, we estimate Westpac needs a total of $6 billion in additional core equity capital before the end of fiscal 2018, of which $3 billion is needed before 1 July 2016,” Mr Ellis said.

Advertisement
Advertisement

“Either a $3 billion entitlements issue or an institutional placement and SPP is a real possibility in coming months.

“The additional capital required in 2017 and 2018 will likely be raised from future retained earnings, dividend reinvestment plans (DRPs), DRP underwrites and asset sales.”

Earlier this month, ANZ raised $3 billion to meet its CET1 capital ratio requirements. NAB announced a $5.5 billion capital raising in May and Westpac raised $2 billion the same month through its dividend reinvestment plan.

Following last week’s $5 billion capital raising by CBA, Digital Finance Analytics principal Martin North says there is no doubt in his mind that capital will continue to be required.

“We will see more capital raisings,” Mr North told Mortgage Business.

“That means the prices of mortgages will continue to rise irrespective of what happens to interest rates.

"We are in a circle where bigger house prices allow bigger loans to be made, which allows the banks to make more loans and require more capital, like a black hole sucking everything in."

Westpac needs to raise $3 billion in capital: Morningstar
mortgagebusiness

 

Latest News

 A big four bank has announced that its cash earnings will be hit by a further $341 million in remediation costs. ...

The residential property market remains “overvalued” and is approaching a tipping point, an economist has said, despite recent signs of ...

The debate surrounding the efficacy of stamp duty has resurfaced, with the NSW government launching a new review into its revenue system.  ...

FROM THE WEB
podcast

LATEST PODCAST: Transparency around rate cuts

Do you think the mortgage market will see more consolidation this year?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.