ANZ bank to raise A$750mn in test of investor appetite

SYDNEY: Australia and New Zealand Banking Group plans to raise A$750 million ($782 million) in convertible preference shares, the first such offering by an Australian bank in almost three years, ahead of the implementation of new global bank rules.

ANZ, which has the highest tier-one capital ratio among its peers at 10.6 percent, announced the issue on Tuesday in what is likely to be a test of investor appetite for bank offerings amid global economic turmoil.

"They are testing the market for different securities and it probably makes sense for them to do so given new capital rules," Paul Xiradis, Chief Executive at fund manager Ausbil Dexia said.

The bank is also trying to tap investors ahead of peers, investors said.

The offer opens on Aug. 31 and will give ANZ more flexibility to manage the redemption of subordinated debt and other residual tier-one capital instruments, the bank said.

ANZ, Commonwealth Bank of Australia , Westpac and National Australia Bank have hybrid capital of around A$5 billion each, with some of it maturing within the next two years, making them likely issuers.

But the banks are awaiting clarity from the Australian Prudential Regulatory Authority (APRA) on guidelines for what qualifies as hybrids under new global capital rules that are aimed at preventing another financial crisis.

But investors said ANZ would have already received APRA approval for this offering.

Australian banks stayed profitable during the global financial crisis and emerged stronger than their global peers.

They have been adding core capital over the last two to three years but may still fall a tad short of new global rules, partly because the Australian regulator is expected to give them less time than most other nations to comply.

Australian banks are expected to hold anywhere between 8 and 9 percent core tier-one capital, prompting talk of dividend reinvestment plans and a slim chance for an equity offering.

The regulator is expected to clarify guidelines for implementation of new capital rules in a short time.

ANZ Securities, CBA, Goldman Sachs , Macquarie , Royal Bank of Scotland and UBS are the joint lead managers on the deal.

Copyright Reuters, 2011