ANZ plans $3bn capital raise

The bank has announced a fully institutional share placement to raise $2.5 billion, which will be followed by an offer to ANZ’s eligible Australia and New Zealand shareholders who will have the opportunity to participate in a share purchase plan (SPP) to raise around $500 million.

ANZ said the institutional placement and SPP will allow the bank to “more quickly and efficiently accommodate” additional capital requirements that were recently announced by APRA – in particular, the increase in average credit risk weights for the mortgage portfolios of major Australian banks to 25 per cent, which takes effect from 1 July 2016.

On a 30 June pro-forma basis, ANZ’s placement would add approximately 65 basis points to the bank’s Common Equity Tier One (CET1) capital ratio, increasing it to 9.2 per cent. If $500 million is raised on the same pro-forma basis, ANZ said it would add a further 13 basis points, increasing the bank’s CET1 capital ratio to 9.3 per cent.

Shayne Elliott, chief financial officer at ANZ, said the bank is well capitalised with a range of options to further increase capital in response to future regulatory changes.

“Recent announcements by APRA have provided greater certainty around the timing and quantum of capital changes, particularly in relation to Australian mortgages,” he said.

“Given current market conditions, APRA’s compressed implementation timetable for the mortgage risk weight changes and the amount of capital to be raised, we believe a placement on these terms provides more certainty for shareholders than other methods available such as consecutive underwritten dividend reinvestment plans.

“This capital raising will supplement our organic capital generation since June 2015 and allow ANZ to achieve a CET1 capital ratio above nine per cent following the introduction of APRA’s revised risk weightings next year. We expect that this will position our CET1 capital ratio in the top quartile of international banks on an internationally-harmonised basis.”

Trading in ANZ shares is expected to resume at 10am today.