Westpac NZ stops dividend to meet capital ratios

Westpac New Zealand increased its target tier one capital ratio and the minimum total regulatory capital ratio from October, bank disclosure documents show.

The increase in the ratio is mainly due to the additional banking operations that Westpac NZ will take from its branch entity as part of the review of the bank's overall operations in New Zealand, a project undertaken with prodding from the Reserve Bank.

The minimum tier one ratio target is now 8.5 per cent, up from 6.8 per cent earlier.  The target total regulatory ratio is 10.5 per cent up from 8.8 per cent earlier.

To preserve capital to meet the revised ratios, Westpac NZ paid no more than NZ$4 million dividend in the year ended September 2010. Last year, the bank paid a dividend of NZ$328 million.

Westpac's actual tier one capital as a percentage of risk-weighted exposures was 9.9 per cent in 2010 and the total capital ratio was 12.7 per cent.