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ANZ raises $1.95 bn, seeks RBS Asia assets

ANZ raises $1.95 bn, seeks RBS Asia assets
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First Published: Wed, May 27 2009. 11 25 AM IST
Updated: Wed, May 27 2009. 11 25 AM IST
Sydney: Australia and New Zealand Banking Group is raising A$2.5 billion ($1.95 billion) in a share sale to fund a likely bid for some of Royal Bank of Scotland’s Asian assets and to strengthen its balance sheet.
ANZ, Australia’s fourth-largest lender, said on Wednesday it had made a non-binding bid for the assets, which RBS recently put up for sale as part of a plan to retreat to its home markets and exit or shrink in up to 36 of the countries where it operates.
The issue makes ANZ the last of the major four banks to tap shareholders for an equity raising, following A$8.9 billion worth of share sales by its rivals since November last year, including investment bank Macquarie Group which raised A$540 million earlier this month.
“They’ve timed it very well. The short selling ban is off, and it was a strong market overnight,” said Donald Williams, chief investment officer at Platypus Asset Management.
“It’s a skinny discount, but it’s enough. I think they’ll get away with that...there’s a little bit more confidence out there about how the banks’ books will play out in the next couple of months.”
Australia is now considered to be in recession and the jobless rate is expected to jump to 8.5% by the middle of 2011 from around 5.4% currently.
Australia’s largest banks have not been hit as hard by the financial crisis as many of its US and European peers but they have been forced to issue equity and debt in recent months as they feel the pinch of a slowing economy at home and as bad debts rise sharply.
These banks have been somewhat shielded by their limited exposure outside Australia and their lack of exposure to toxic assets.
HSBC Holdings and Standard Chartered have also expressed interest in buying RBS’s assets, which include operations in India, Pakistan, Indonesia and Taiwan and could fetch about $2 billion, sources have told Reuters.
It is five-and-a-half years since ANZ last turned to shareholders with a rights issue. In November 2003, it raised A$3.6 billion to acquire National Bank of New Zealand.
Institutional support
ANZ said it was raising fresh equity through an institutional placement of shares at A$14.40 each, a discount of 7.5% to the stock’s closing price of A$15.57 on Tuesday.
ANZ shares are expected to be on a trading halt until Thursday’s market open. ANZ’s credit default swaps were unchanged at around 85 basis points.
Investors would be focusing on the longer term advantage of participating in the share issue.
“On a short term basis, it’s on a marginal discount to recent share prices, so it’s a marginal proposition on that count. But longer term investors might look at it and say the intrinsic value of the bank is actually significantly more than the current share price,” said Angus Gluskie, portfolio manager at White Funds Management.
ANZ gave its retail shareholders the chance to buy additional shares, raising up to around A$350 million.
It said some of the money would also be used to bolster its balance sheet, saying bad-debt charges were likely to be about 20% higher in the second half of its fiscal year than in the first half when charges totalled A$1.44 billion, as additional stress in the commercial segment continued.
Last month, ANZ reported a bigger-than-expected 43% drop in half-year cash profit, cut its dividend and forecast tough times ahead as bad debt charges doubled.
Chief Executive Mike Smith said at the time the bank’s full-year provisions were likely to exceed the A$2.5 billion forecast it had made earlier.
But it said its tier-one capital ratio would still remain above its target range of 7.5-8%, assuming it acquired the RBS assets and raised the required amount of capital.
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First Published: Wed, May 27 2009. 11 25 AM IST
More Topics: ANZ Bank | Funds | RBS | Asia | Stake |