NAB To Raise $2.75 Billion In Fresh Equity

Post by NeilMc on July 22, 2009 · Under Australian Economy, banking, Business News, Capital Markets, Company News, Equities · 4 Comments 

Australian banking major and the nation’s third largest lender says it intends to raise $2.75 billion in fresh equity capital in order to strengthen its balance sheet as bad debts continue to rise.

On Wednesday NAB released its quarterly update, which showed that the lender had to increase provisions for bad and doubtful debt to $1.06 billion for the quarter ending June 30th. NAB’s unaudited cash earnings, a metric closely followed by investors stood at around $900 million.

NAB has followed the lead of the other big four banking groups by strengthen its balance sheet to protect itself from deteriorating economic conditions which has produced a rise in bad debt.

NAB says it plans to raise at least $2 billion by way of a fully underwritten institutional equity placement at a 10 per cent discount to its last traded price of $23.58. The final price will be established through book building for the placement.

The lender also plans a retail offering worth $750 million for its retail investors.

“This capital raising not only ensures we maintain a strong balance sheet position, but also provides us with the flexibility to support our existing customers, accelerate initiatives to enhance our SME market position, and pursue additional organic and strategically aligned inorganic opportunities,” NAB chief executive Cameron Clyne said.

The capital raising will bolster its closely watched tier-1 capital positions to 8.8 per cent up, from its current 8.2 per cent.

The lender said the strengthening of its balance sheet was “consistent with the group’s intention to maintain a strong capital position through the economic cycle, accommodating volatility in core and non-core capital items and possible tax case provisions”.

Australia’s third largest lender as measured by market capitalisation said the fresh equity would be used to support growth of existing businesses and give it the ability to take advantage of outside opportunities.

The institutional portion of the capital raising is being fully underwritten by investment banks, Deutsche Bank, Merrill Lynch International and Goldman Sachs JBWere.


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4 Responses to “NAB To Raise $2.75 Billion In Fresh Equity”

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  4. | Australia News on July 23rd, 2009 2:51 am

    [...] NARead more at http://www.money-au.com.au/finance-news/banking/nab-to-raise-275-billion-in-fresh-equity-4914/ [...]

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