Westpac to Raise Capital

Submitted by Share Trading on Wed, 10/12/2008 - 02:45

Australia’s third largest banking corporation, Westpac (WBC) has decided to raise its capital by A$2.5 billion through a share sale on Tuesday, to strengthen its balance sheet due to the acquisition of St George Bank (SGB), which does not have a sound lending books and raise in bad debt charges. This move follows a capital raising by National Australia Bank (NAB) last month. There is also speculation that Commonwealth Bank (CBA) is also planning to replenish its capital reserves with a $2 billion equity offer in coming months.

In the capital raising, WBC institutional shares were placed at $16 per share representing a 10.5% discount on the previous closing price. Westpac said in a statement that its performance in October and November, the first two months of its fiscal year, had been sound but suffered from higher impairment provisions on troubled corporate debt. It is said that, Westpac was also looking to raise at least $1 billion from a debt sale in the United States to take advantage of an Australian government guarantee.

George Clapham, head of equities at Fortis Investment Partners, said Westpac's share sale reflected Australian banks' need to boost their Tier-1 capital ratios to satisfy lenders offshore and added that ‘They’ve just got to raise capital because they're trying to get offshore funding, and people won't look at them until they've got a ratio in the 8’s’.

Westpac Banking Corporation said its share issue is fully underwritten by JP Morgan, UBS and Morgan Stanley which would bring its Tier-1 capital ratio to around 8.32 percent after taking into account its $9 billion takeover of rival St George Bank, which was completed this month. The bank take over which was the country's biggest bank merge, created the lender with total assets of A$500 billion and moved it to the rank of second largest lender but NAB still remains as the biggest lender with A$564.6 billion.

$550 FREE Brokerage - Save money on Commissions!
ANZ E*Trade is offering you $550 worth of free brokerage.
invest.etrade.com.au

Post new comment

The content of this field is kept private and will not be shown publicly.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd> <blockquote> <h2> <h3>
  • Lines and paragraphs break automatically.

More information about formatting options

CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
14 + 0 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

E*Trade - $550 FREE Brokerage!