ANZ hits market, seeking Tier 1 capital

It is only a couple of weeks since ANZ danced around in one outline of how to produce its share of the capital needed to walk the Australian banking sector to the elevated and "unquestionably strong ratios" pushed by the Financial System Inquiry.

In an interview with the bank's Blue Notes portal, Shayne Elliott, the bank's chief financial officer, played up the merit of relying on retained earnings, the dividend reinvestment plan and releasing capital through select asset sales.

Now ANZ is hitting the market for up to A$3.0 billion in new shares. The bank obtained an underwriting on $2.5 billion from Citi, Deutsche and JP Morgan. It will attempt to sell a further $500 million in shares under a share purchase plan.

The choice of capital raising model has drawn critics, given National Australia Bank's old fashioned use of a rights issue for its recent capital raising.

The bank is doing so to lift its capital level, in part in response to the recent changes outlined by Australian Prudential Authority Regulator on 20 July 2015.

The capital additional capital will add between 65 basis points and 78 bps of additional common equity tier 1 capital, increasing the pro-forma CET1 ratio to up to 9.3 per cent.

Elliott said in a market statement that: "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."