ANZ Bank Shares Drop Most Since 2008 After Capital Raising

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Australia & New Zealand Banking Group Ltd. shares slid the most in almost seven years after the lender reported profit that missed analysts’ estimates and as it raises A$3 billion ($2.2 billion) to shore up capital.

The stock closed 7.5 percent lower on Friday in Sydney at A$30.14, the sharpest drop since November 2008. The benchmark S&P/ASX 200 Index declined 2.4 percent.

The Melbourne-based lender said Friday it sold 80.8 million shares at a 5 percent discount to Wednesday’s close to meet new capital rules. The bank reported Thursday cash profit that missed expectations as bad-debt charges climbed, prompting some analysts to cut their earnings forecasts.

“Higher provisions don’t send out a good signal,” T.S. Lim, a Sydney-based analyst at Bell Potter Securities, said by phone. “Also the feeling among investors is the capital raise isn’t enough and we’d see them do more.”

ANZ reported a 4.3 percent increase in nine-month cash profit, which excludes one-time items, to A$5.4 billion. Since the announcement, the average of 14 analyst estimates compiled by Bloomberg for the lender’s earnings in the year to Sept. 30 has fallen by 0.8 percent to A$7.37 billion.

More Capital?

The stock was halted from trading Thursday for the share sale to institutional investors. ANZ is also raising another A$500 million by selling stock to existing shareholders. Morningstar Inc. was expecting the bank to raise as much as A$7 billion in coming years, analyst David Ellis said Thursday.

“We were surprised by the small magnitude of ANZ’s raising,” UBS Group AG analysts led by Jonathan Mott wrote in an investor note. “We believe ANZ will still need significant amounts of additional common equity Tier 1” to meet upcoming regulatory changes.

Australia’s banking regulator last month raised the average capital that the country’s four main lenders need to hold against potential home-loan losses. It also said the banks would need to add 200 basis points of capital to be considered among the world’s safest.

National Australia Bank Ltd. sold shares worth A$5.5 billion in the country’s biggest rights issue earlier this year, while Westpac Banking Corp. raised A$2 billion and ANZ garnered about A$480 million through a dividend reinvestment plan, where investors swap all or part of their dividends for new shares.

Stock Slump

Commonwealth Bank of Australia, the only major bank in the country yet to reveal any capital raising plans this year, is considering a rights issue, the Australian newspaper reported Friday. The lender reports earnings Aug. 12, while National Australia is scheduled for Aug. 10.

Commonwealth shares dropped 3.8 percent Friday as National Australia lost 2.3 percent and Westpac sank 3.3 percent. An index of the four major lenders compiled by Bloomberg dropped 7 percent this week, the most since August 2011.

“The need for more capital is diluting earnings and depressing share prices,” said Sean Fenton, a Sydney-based fund manager at Tribeca Investment Partners Pty Ltd., where he helps oversee $1.7 billion. “This isn’t the end of the story. Certainly it’s a big headwind for the banks so we’re seeing more pressure there.”

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