NAB pumps up share purchase plan to $1.25bn
NAB shares have soared after it tapped heavy demand to more than double the size of its share purchase plan for mum and dad investors.
National Australia Bank has tapped heavy demand to more than double the size of a share purchase plan for mum and dad investors to $1.25bn, bringing the total size of its latest capital raising to $4.25bn.
In an ASX statement issued on Wednesday, NAB said that given "strong support shown by eligible shareholders" it had increased the size of its $500m share purchase plan to $1.25bn. It adds to a $3bn placement of new shares to institutional investors completed a month ago, as the bank sought to shore up its balance sheet in light of the COVID-19 economic turbulence.
But even NAB’s increase in the share purchase plan’s size didn’t meet the flood of demand for the offer. The share purchase plan issuance was made to about 615,000 eligible NAB shareholders, with valid applications received from approximately 155,000 shareholders for a total value of $2.9bn, the bank’s statement said.
Still, NAB’s shares participated in a bumper rally across the sector as fears of a prolonged recession eased. NAB’s stock climbed 7.8 per cent to $17.94 on Wednesday, while share price gains in the other major banks ranged from ANZ at 8.6 per cent at the top end to Commonwealth Bank’s 4.9 per cent rise at the other end of the spectrum.
The rally in bank stocks came as UBS analyst Jonathan Mott has became more upbeat on the sector as economic data and the numbers under federal government’s JobKeeper program had not played out as feared.
“We are more optimistic on the banks near term, however the medium-term challenges for the sector remain,” he said in a note to clients.
“While we are certainly not out of the woods, the likelihood of a more severe downturn with even larger credit losses and CRWA (credit risk weighted assets) pro-cyclicality driving dilutive capital raisings appears less likely in our view.”
UBS also expects bank stocks to play “further catch-up” with gains in the ASX as the domestic economy reopens.
The big banks have been preparing for a spike in loan losses and in recent weeks have made combined provisions for COVID-19 of almost $5bn.
Under the share purchase plan, NAB said 98 per cent of applicants would receive "at least their pro-rata allocation" of stock.
“We received strong interest in the offer, allowing us to increase its size by an additional $750 million, and we thank our shareholders for their ongoing support,” NAB chief executive Ross McEwan said.
“Together with our recently completed institutional placement, the capital raised through the offer will assist us to manage through a range of possible scenarios related to the COVID-19 pandemic, including a prolonged and severe economic downturn.
“We acknowledge our shareholders have a choice where they invest their money. Their support will help ensure we remain a strong bank, ready to deliver on our clear ambition for customers, colleagues and the community.”
The Australian flagged on Monday that the retail offer was likely to fuel heavy demand from small retail investors, amid concerns their holdings would be diluted by large institutional shareholders.
The capital raising kicked off in April and allowed NAB to shore up its capital buffers during the COVID-19 turmoil and pay a dividend, albeit at a dramatically reduced level.
NAB took drastic action in the March half-year, slashing the interim dividend to 30c per share from 83c. Its rivals ANZ and Westpac deferred making a decision on dividends.
Under NAB’s retail offer, about 88 million new fully-paid ordinary shares are being issued on June 2 at a price of $14.15 per share.
The issue price is equivalent to the price paid by fund managers in the institutional placement.
On the share purchase plan, NAB said valid applications received represented a participation rate of approximately 25 per cent of eligible shareholders – or 21 per cent by shareholding – with an average application amount of $18,500.
The strong interest required “a scaling back” of valid applications that NAB received.
The bank’s statement said eligible shareholders who applied for $2,500 or less of stock under the share purchase plan, were not subject to any scale back and would receive the amount applied for.
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