Westpac to Raise $3.5 billion
Following the lead of other major banks, Westpac Banking Corporation (ASX:WBC) announced a pro rata entitlement offer to raise $3.5 Billion of ordinary shares.
Westpac will offer the new shares at a 13.1% discount for $25.50 per share. The entitlement is set to be completed by 19 October 2015 and its shares will remain in a trading halt. The bank offers one new share for every 23 ordinary shares held. Westpac American Depository Receipts (ADR) are not eligible to participate in the entitlement offer. The equity raised will add approximately 100 basis points to Westpac’s Tier 1 capital ratio making it over 14%. This will make Westpac among the top quartile banks globally.
The capital raising was needed after the amount of capital required against mortgages has been increased more than 50% as part of the regulatory requirements to be in effect from 19 October 2016. The bank also announced an increase in the variable home loan and residential investment property loan rates by 0.2% from 20th November 2015.
Westpac Announces Preliminary FY15 Results
The bank also reported its unaudited financial results for FY15 where net profit increased by 6% and cash earnings were up 3%. Australian banking experienced an 8% increase in cash earnings while the New Zealand division saw a 6% increase respectively.
The Group states that the asset quality remains a major strength as ‘the stressed assets declined and the Australian local mortgage 90+ days remained at low levels of 0.045%.’The group expects to distribute a final, fully franked dividend of 94 cents per share and increase of 2 cents compared to pcp. The shares offered under the entitlement are not eligible for the dividend. According to the CEO Brian Hartzer, “The positive results were driven by solid operating performance, supported by strong gains in customer numbers.”
The stock WBC is trading close to $30.40 currently, which is a 5.3% loss for the past 12 months and a 8.20% year to date loss.
Author: Imran Valibhoy
Oct 14, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.