Australian Banks Seen Needing $25 Billion in Capital – Bloomberg.
Commonwealth Bank of Australia and its three main competitors may need as much as A$30 billion ($25 billion) after a government-commissioned inquiry called for “unquestionably strong” capital levels, analysts said.
The shortfall is based on lenders needing to boost levels to within the top quartile of their global peers and set aside additional funds against potential losses on home mortgages, as recommended by the Financial System Inquiry report released yesterday in Sydney by Treasurer Joe Hockey.
Australia’s major lenders hold about 10 percent to 11.6 percent of their assets as Tier 1 capital compared with at least 12.2 percent at the world’s safest banks, the government’s first inquiry into the financial system since 1997 said. Banks should be strong enough to withstand shocks, particularly given their reliance on overseas investors for funding, the report said.
“The onus on capital is in line with global changes and Australia has to fall in line,” John Buonaccorsi, a Sydney-based analyst at CIMB Group Holdings Bhd. said in a phone interview after the report was released. “I don’t expect a straight capital raising yet.”
Australia’s largest banks are initially more likely to resort to dividend reinvestment plans, where investors swap all or part of their dividend for new shares, and limiting increases in payout ratios, he added.
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