HONG KONG (IFR) - National Australia Bank has launched a A$3bn (US$1.9bn) institutional share placement to top up its capital in light of the uncertain economic outlook due to the Covid-19 pandemic after reporting a 51% drop in first-half cash profit.
It is issuing 212m new shares, or 7.1% of existing shares on issue, at a fixed price of A$14.15 apiece, or a 10.2% discount to the pre-deal close of A$15.76 on April 24.
Existing shareholders who participate in the placement will enjoy priority in allocation on a pro-rata basis, NAB said.
The bank is also raising A$500m through a share purchase plan for eligible shareholders to subscribe new shares from May 4 to May 22.
The placement is expected to increase the bank’s common equity Tier 1 capital ratio from 10.39% to 11.2%, providing NAB with a buffer "to assist with credit losses and RWA increases which could occur under a range of scenarios including a severe and prolonged downturn," NAB said.
Goldman Sachs and Macquarie are the underwriters.
NAB is also cutting its interim dividend to A$0.30 per share from A$0.83 previously, equivalent to a A$1.6bn or 37bp of CET1.
This comes after the Australian Prudential Regulation Authority said earlier this month that banks would need to carry out stress tests and any dividends paid out prior should be at a "materially reduced level".
NAB reported that cash profit – the preferred measure among Australia's banks because it strips out one-off items such as asset sales – for the six months to March 31 fell 51% year on year to A$1.44bn.
The bank set aside a further A$807m in provisions related to the coronavirus, while a change in software capitalisation policy also lowered earnings after tax by A$742m.
Business and private banking, which accounted for more than half of earnings during the first half, recorded a 6% dip in cash earnings to A$1.38bn, primarily due to a lower net interest margin.
Corporate and institutional banking cash earnings fell 10% to A$701m because of lower markets income, although NAB said this was partially offset by higher lending volumes and lower credit impairment charges.
Meanwhile, consumer banking earnings climbed 26% to A$699m as credit impairment charges fell with property prices stabilising, and the bank's New Zealand unit saw cash earnings increase 6% to A$562m.
(Reporting by Candy Chan; Editing by Vincent Baby)
