ANZ wants more and less capital

ANZ on Friday said it upped to $2 billion the level of new hybrid capital it will take on board through the preference share issue announced last month. The target then was $750 million.

With half of ING Australia and some Asian assets of Royal Bank of Scotland to fund, ANZ is the hungriest of the big banks and the one most likely to return to the market seeking equity capital.

ANZ told the annual meeting in Melbourne that with this extra capital its tier one capital ratio was 10 per cent, and down from 10.6 per cent at the end of September 2009.

While actively selling new shares, the bank took time at the AGM to spell out its view on a couple of regulatory debates, including one of those raging around capital.

Charles Goode, chair of the board, said he favoured "a move to specify the range for the appropriate level of tier one capital depending on where we are in the economic cycle."

This was, Goode said, "so that it becomes acceptable for a bank to draw down on a strong capital position in a recessionary year."

In other words in a period in which ANZ has sold $9 billion in new shares - and equal to more than a third of its September 2008 capital levels - ANZ would like, in theory, in a future crisis, to seek to trade on with less.

In the real world ANZ is planning to limit its dividend payout and does not share the notion of some analysts that a return of capital is plausible in banking.

ANZ needed "higher capital than we have historically held and with our expansionary aspirations I cannot see any buy backs," he said.

The outlook, Goode said rather blandly, was "for an improvement in profits in 2010 and a strong 2011."