ANZ raises $2.5b, seeks another $350m

ANZ Banking Group Ltd has raised $2.5 billion by selling new shares to institutions
to bolster its cash holdings as it bids for some of Royal Bank of Scotland's Asian
assets.

ANZ, the Australian bank with the biggest Asian presence, also said in a statement
on Wednesday its provisions for bad debts may be up to 20 per cent higher in the
second half than in the first half.
This would take the full year total to just over $3 billion.
The bank raised $2.5 billion on Wednesday in a "significantly oversubscribed"
institutional placement, and is planning a share purchase plan for retail investors
to raise another $350 million.
ANZ placed 173. 6 million shares at $14.40, a 7.5 per cent discount on the stock's
closing price of $15.57 on May 26.
A trading halt is expected to be lifted when the market opens on Thursday.
"ANZ will probably use about half of the funds around the RBS Asia assets,"
Macquarie Equities analyst Tom Quarmby said.
Mr Quarmby, who rates ANZ an `outperform', said ANZ's statement was transparent,
given how it updated investors about impairments and asset values.
"The impairment costs were a touch higher than we thought but the figure isn't
showing further major deterioration."
The bank, under chief executive Mike Smith, is pursuing a strategy of becoming a
super regional bank, with the aim of getting over 20 per cent of its revenue from
Asia by 2012.
The global financial crisis, while hitting ANZ's own shares and profits, also has
thrown up many takeover opportunities, including the RBS assets, as US and European
banks in a worse position than Australia's were forced to sell assets.
The bank is one of a number of companies in a competitive sales process being
conducted by Royal Bank of Scotland for its Asian businesses, Melbourne-based ANZ
said.
ANZ has submitted a non-binding proposal for selected businesses, but the timeframe
and whether a transaction will occur remained unknown.
ANZ used recent relative share price strength and calmer market conditions to
conduct the raising.
While the shares have retreated from the five-month high $17.40 of early April, they
are still well above the 8 1/2-year low $11.89 of early February.
The sales of shares to institutions and retail investors would allow ANZ to fund the
RBS acquisition while maintaining its tier 1 capital ratio above its target of 7.5
to eight per cent.
Macquarie's Mr Quarmby said he was estimating a tier 1 level of 8.3 per cent or a
little higher, assuming ANZ bought RBS's assets.
"The capital level won't be setting a new standard for Australian banks, and Mike
Smith already said that the banks were in danger of being overcapitalised," he said.
IG Markets research analyst Ben Potter said ANZ shares may come under pressure when
they resume trading because of the bad debt warning, and the bank would have rather
conducted the share placement with the recently lifted short selling ban on
financial stocks still in place.
"ANZ have been caught in the headlights following ASIC's (Australian Securities and
Investment Commission) decision on Monday to lift the short selling ban early," Mr
Potter said.
ANZ said that, while the banking outlook remained difficult to predict, the
second-half credit provision charge would be up to 20 per cent higher than the
$1.435 billion for the first half, which would take it up to about $1.7 billion.
The bank said the commercial segment was likely to experience further difficulties
in the second half of calendar 2009.
The bank also said that expenses on structured credit derivatives had reduced by
about $400 million after tax since March 31 as credit spreads had reduced globally
and the Australian dollar gained.
That gain had been offset largely by economic hedging.
ANZ said income from its global markets division was likely to revert to more normal
levels in the second half, after a strong performance in the first half because of
the extreme market volatility.
For retail shareholders, the bank will offer the opportunity to buy up to $15,000 in
new shares without incurring brokerage or other transaction costs.