Investors In The Bank As Nab Raises $3bn

The Age
11 November 2008
DANNY JOHN, SYDNEY

NATIONAL Australia Bank is expected to be followed by at least one major rival in directly tapping shareholders for funds to strengthen balance sheets, after it successfully raised $3billlion yesterday, $1billion more than it originally thought possible.

In a sign that a floor is finally beginning to be put under the recent falls in financial markets, NAB surprised even itself when investors snapped up an initial offering priced at $20 a share and pushed the underwriters of the issue for an additional 50%.

Having waited for the impact of the latest drop in global interest rates - including last week's Reserve Bank cut of 75 basis points - to flow through to the ASX, the bank had to increase the size of the fund-raising exercise from $2 billion after strong demand from major institutions. It also meant that NAB was able to go to the market at a small discount of about 10% to the $22.15 price at which its stock was placed in a trading halt yesterday. The shares will resume trading this morning .

The push for additional stock was led by fund managers who are flush with cash, having pulled out of the market as values plummeted, positioning themselves on the sidelines, waiting for share prices to bottom.

The success of the issue - which was backed by Goldman Sachs JBWere, Merrill Lynch and UBS - has allowed NAB to pull its early proposal to raise extra capital from a more time-consuming, and share price-dampening, underwriting of its dividend reinvestment plan.

Yesterday's move prompted speculation that NAB would renew its interest in buying the banking arm of the troubled Suncorp financial services group. But NAB's deputy chief executive, Michael Ullmer, ruled out such a move, saying the bank was concentrating on organic growth.

Market observers said similar fund-raising moves by NAB's main competitors, ANZ, Westpac and Commonwealth were likely as they seek to strengthen their financial positions in the wake of increasing bad debts while looking at potential acquisitions like Suncorp.

ANZ is considered the most likely to follow suit, as it looks for about $1 billion from its own dividend reinvestment underwriting plan.

With NAB looking to push the best measure of a bank's capital strength - its Tier 1 ratio - up by 0.7% to over 8%, ANZ is now sitting at 7.7%.

However, ANZ was maintaining its existing stance yesterday.

"There is nothing further planned at this stage," a spokeswoman said.

Commonwealth Bank, which is separately raising $2 billion from institutional shareholders to pay for its planned acquisition of BankWest, said it was "comfortable" with its Tier 1 capital position which stands at 7.6%, the lowest of the Big Four banks.

CBA will outline its capital position on Thursday during a trading update covering its first-quarter performance of its 2009 financial year.

CBA shares slipped 5% or $2.07 to $38 in response to NAB's move.

Westpac, which is soon to merge with St George, dropped $1.09 to $19.91 while ANZ was off 39 at $15.90.

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