Westpac to raise $A3.5 billion in discounted rights offer

Australia's second-largest bank lender, Westpac Banking Corp, plans to raise $A3.5 billion in a discounted rights offer to meet new capital requirements and posted a 3% increase in full-year cash earnings boosted by lending growth.

The one-for-23 offer of about 138.4 million shares at $A25.50 apiece will lift Westpac's common equity Tier-1 ratio by about 100 basis points to more than 14%, which the lender says will put it in the top quartile of banks globally.

The shares traded at $A30.44 before being halted for the capital raising.

The entitlement offer will allow Westpac to reach its target of boosting capital by $A6 billion this year, adding to the $A2 billion from its dividend reinvestment plan and $A500 million from the partial sale of BTIM.

All of Australia's big four lenders have been raising capital to meet new requirements from the Australian Prudential Regulation Authority, requiring them to hold more capital on their books to mitigate the risk of losses on home loans.

Westpac announced a 20 basis points hike in its variable home loan and residential property loan rates from November 20, reflecting changes to mortgage risk weights, which increased the amount of capital required to be held against mortgages by more than 50%.

Full-year cash earnings at Westpac rose to $A7.82 billion, from $A7.6 billion a year earlier.

Net interest income rose 6% to $A14.2 billion, as loans grew and the net interest margin was unchanged at 2.08%. Non-interest income was unchanged at about $A6.3 billion. Net profit rose 6% to $A8 billion.

Operating expenses rose 5% to $8.6 billion, which the bank says mainly reflects spending on initiatives to boost wealth, small-to-medium enterprise and digital revenue. Impairment charges rose 16% to $A753 million.

Westpac New Zealand cash earnings rose 8% to $A851 million, or a gain of 6% in New Zealand dollars.

Revenue rose 7%, boosted by 7% growth in lending, 5% increase in deposits, and a four basis point rise in margins.

Expenses in New Zealand rose 6%, which it attributes to costs launching its Westpac One online platform and a new reward credit card. Impairment charges rose by $21 million.

Westpac will pay a fully imputed final dividend of 94Ac a share, up 2c from a year earlier.

The shares have declined about 5.3% in the past 12 months, underperforming the S&P/ASX 200 Index, which fell 0.8% in the same period.

(BusinessDesk)