The Courier-Mail

SIM­PLY CAP­I­TAL

CBA launch fundrais­ing af­ter $9b profit

- JEFF WHAL­LEY

THE Com­mon­wealth Bank has launched a $5 bil­lion cap­i­tal rais­ing along­side its record $9.15 bil­lion profit, but an­a­lysts warn it may need to tap share­hold­ers again to sat­isfy reg­u­la­tors.

The coun­try’s big­gest len­der is rais­ing the funds from share­hold­ers to com­ply with a move by the Aus­tralian Pru­den­tial Reg­u­la­tory Au­thor­ity to bring the big four bank’s cap­i­tal re­serve lev­els into line with the world’s top fi­nan­cial in­sti­tu­tions.

The move came as CBA posted a 5 per cent in­crease in cash profit to $9.15 bil­lion and boosted its fi­nal div­i­dend by 4 to $2.22 a share.

Chief ex­ec­u­tive Ian Narev (pic­tured) said the cap­i­tal rais­ing would take CBA’s buf­fer against fi­nan­cial shocks above the level de­sired by reg­u­la­tors.

CBA is of­fer­ing share­hold­ers one new share for ev­ery 23 they own at $71.50 each in a re­nounce­able rights is­sue. That is a 10.5 per cent dis­count to the clos­ing price of the group’s shares on Tues­day, ad­justed for the bank’s full-year div­i­dend.

The shares were put in a trad­ing halt yesterday, to re­sume trad­ing next week.

“For us the right thing was al­ways go­ing to be do it this way so that all the share­hold­ers get a chance to par­tic­i­pate and those that don’t can sell their rights and get a bit of money,” Mr Narev said.

He said the de­ci­sion was not af­fected by ANZ’s con­tro­ver­sial $3 bil­lion cap­i­tal rais­ing an­nounced last week, where in­sti­tu­tional in­vestors got most of the new shares.

But the CBA’s $5 bil­lion rais­ing is smaller than some an­a­lysts ex­pected.

Credit Suisse an­a­lyst Jar­rod Martin said it would fall well be­low what reg­u­la­tors have re­quested once ad­justed for changes to mort­gage risk weights and other fac­tors.

Morn­ingstar an­a­lyst David El­lis said CBA would prob­a­bly need to add another $3 bil­lion to its re­serves in the next few years, but it would likely raise that through its div­i­dend rein­vest­ment plan.

CBA’s full-year re­sults painted a mixed pic­ture, with tough com­pe­ti­tion for loans and fall­ing in­ter­est rates weigh­ing on the prof­itabil­ity of its lend­ing.

Mr Narev said the Re­serve Bank’s ef­forts to stim­u­late the econ­omy by cut­ting in­ter­est rates had helped bol­ster the hous­ing sec­tor while the Fed­eral Gov­ern­ment’s mea­sures to help small busi­nesses were also help­ing the econ­omy.

“The Aus­tralian econ­omy has some good foun­da­tions,’’ he said. “There is a high de­mand from peo­ple who want to buy Aus­tralian goods and ser­vices, in­vest in Aus­tralia, ed­u­cate their chil­dren in Aus­tralia, visit Aus­tralia and in some cases move to Aus­tralia.”

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