ANZ head defends equity raising

ANZ chief executive Mike Smith has defended his bank’s $3 billion equity raising.

ANZ chief executive Mike Smith said his bank’s $3 billion equity raising that triggered a 7.5 per cent share price slide last Friday underlined that capital was a resource that banks have to manage carefully.

Even so he described Friday’s share price reaction as “a bit ill-considered”.

“When everybody calms down I would think the equity raising will be seen as a good decision, a clever deal,” Mr Smith said.

He also suggested a sale of ANZ’s minority holdings in Asian-based banks could move ahead, but insisted there won’t be a “fire sale” of assets.

His comments came as Commonwealth Bank became the latest lender to launch a mega-capital raising, tapping investors for $5bn through renounce­able entitlement offer.

Mr Smith was speaking in Port Moresby, before flying to the bank’s New Zealand board meeting in Auckland.

“You can be brilliant in hindsight. We thought long and hard about the most equitable and efficient and the quickest way of raising equity.

“We wanted everyone to get as fair a deal as possible, taking into account the size of the issue. A rights issue of one in 30 would have looked a bit strange, and when we did the numbers the smaller retail shareholders would have been disadvantaged, so we felt a share placement was the right way to go.

“Big retail shareholders are in a different position, but they were likely to have got an allocation from their brokers on the placement.”

Two of the other major banks had raised capital before ANZ, “but we were the first following the APRA announcement (of increased capital requirements) — so we knew what we were dealing with. The APRA announcement brought forward the timing — which we admit we thought would be another year at least”.

“But it’s important to get some certainty into the market, to draw a line under that and move on”.

The requirements for banks to hold more capital added another reason for selling minority interests, he said — with ANZ valuing its own Asian partnerships at about $5bn.

“Under APRA guidelines,” he said, “they don’t accept such stakes as worth anything, effectively.”

This is strange, he added, with Australia being the only country with such a regulation.

“But we have to work within the rules,” he said.

The reporter was a guest of ANZ in Papua New Guinea.