Westpac expected to be next big four bank to raise capital

New Westpac CEO Peter King. Picture: Nikki Short

Westpac is expected to be the next bank to head to the market for an equity raising after the NAB on Monday announced it would move to secure $3.5bn from investors.

As announced to the market on Monday, NAB will raise funds at $14.15 per share, an 8.5 per cent discount to the stock’s last closing price of $15.46, as it slashed its dividend payment and announced a fall in earnings.

NAB will secure $3bn through an underwritten placement and $500m through a non-underwritten share purchase plan, with 212 million new shares issued, equating to 7.1 per cent of NAB’s shares on issue.

Working on the raising is Macquarie Capital and Goldman Sachs.

Market experts said of all the banks, NAB had been the most in need of equity from a top tier capital perspective, after it shelved its plans for a $2bn hybrid issue in March.

However, they believe that COVID-19 disruptions would see all the major lenders tap the market.

Talk about Westpac raising funds comes as its new chief executive Peter King this month revealed that the bank would have to pay about $900m as a penalty to Austrac for anti-money laundering penalties.

Westpac only tapped the market for $2.5bn in November, calling on the services of JPMorgan, UBS and Citi.

At that time it cut its dividend and said the raising was needed because costs had increased amid a low interest rate environment and its cash profit had declined.

NAB and ANZ were both expected to launch equity raisings around the time that Westpac sought cash from investors to improve their capital positions, but this did not eventuate.

But now the banks are under pressure to reduce or cut dividend payments from the Australian Regulatory and Prudential Authority as companies seek a reprieve from lenders amid the coronavirus crisis.

Some also believe that an equity raising will position banks to take advantage of additional demand by companies to secure more debt to tide them over until after the COVID-19 disruptions.

Westpac shares are currently trading at about $14.78 after they reached a 2020 high of $25.81.