ANZ announces $3bn capital raising to meet APRA requirements
(10 August 2015 – Australia) ANZ has completed a fully underwritten institutional share placement to raise A$2.5 billion, plus a Share Purchase Plan (SPP) to raise a further A$500 million.
In a statement on 6 August, ANZ said the Placement would be followed by an offer to ANZ’s eligible Australian and New Zealand shareholders who would have an opportunity to participate in the SPP, which is not underwritten.
The Institutional Placement and SPP allowed ANZ to more quickly and efficiently accommodate additional capital requirements recently announced by the Australian Prudential Regulation Authority (APRA), in particular the increase in average credit risk weights for major bank Australian mortgage portfolios to 25 percent taking effect from 1 July 2016.
The Placement has been fully underwritten by Citigroup Global Markets Australia Pty Ltd, Deutsche Bank AG, Sydney Branch and JP Morgan Australia Ltd.
ANZ chief financial officer Shayne Elliott said; “ANZ is currently well capitalised with a range of options available to 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.
“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 Common Equity Tier One (CET1) Capital Ratio above 9 percent 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,” Elliott said.
On a 30 June 2015 pro-forma basis, the placement would add approximately 65 basis points (bps) to ANZ’s CET1 Capital Ratio increasing it to 9.2 percent.
If A$500 million is raised under the SPP, on the same pro-forma basis this would add a further 13 bps increasing the CET1 Capital Ratio to 9.3 percent.
In the same announcement the bank released unaudited earnings, reporting it had made a cash profit of A$5.4 billion in the nine months to 30 June 2015, up 4.3 percent on the same period last year.
Revenue for the three months to 30 June 2015 grew at a slightly faster rate than in the first half, while expense growth for the three month period slowed.
The total provision charge for the nine month period to 30 June 2015 was 13 percent higher at A$877 million.
While the Individual Provision charge reduced 12.5 percent, the Collective Provision charge increased due to balance sheet growth coupled with some risk grade migration related to the resources and agriculture sectors.
ANZ said for the Full Year 2015, while loss rates are expected to remain well under the long term average, ANZ estimates that the total loss rate will be around 21 bps equating to a total provision charge of circa A$1.2 billion given increased collective provisioning.
Customer Deposits for the nine month period to 30 June 2015 grew 9.5 percent (+5 percent FX adjusted) with net loans and advances increasing 7.7 percent (+5.4 percent FX adjusted).
During the third quarter (period 1 April to 30 June 2015) the Group Net Interest margin remained broadly stable5 assisted somewhat by slower growth in lower margin liquid asset holdings.
The CET1 Capital Ratio was 8.6 percent at 30 June 2015.
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