ANZ raise $2.2 billion in Share Purchase Plan
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The ANZ Bank has pulled off an amazingly successful share purchase plan raising $2.2 billion from retail investors.
The retail share placement is the largest in Australian corporate history after a planned raising of $350 million. Investors in ANZ were allocated their full entitlement at $14.40 per share. The ANZ share price closed down over 2% today at $15.89 indicating some retail investors were already taking profits.
The share purchase plan takes the ANZ tier one capital to 9.5%, the largest of all the banks.
ANZ announcement better than expected despite rise in bad debts
ANZ announce dividend cut, who’s next?
ANZ have been the first of the big four banks to announce a cut to their dividend as the banks start to feel some of the pain that has devastated the banking sector overseas.
ANZ announced a cut of 25% to their dividend which in direct response to rising corporate debt levels. This will reduce the annual dividend from $1.36 to a little over $1 and will save the ANZ approximately $500 million.
The announcement came as the ANZ delivered an update for the first four months of the reporting year revealing a update on their current operations.
The ANZ have boosted their provisions for bad and doubtful debts to between $2.4 and $2.5 billion, this is broadly in line with industry expectations. Cash earnings were up 18% on the same period last year but the increased impairment costs drove the cash earnings down 11%. ANZ revealed they have been a beneficiary of cash inflows as income growth grew 16%.
One point of note was the 125% increase in the Asian division which CEO Michael Smith has clearly identified as the future of the company. Although the Asian division is still only small the next couple of years will be pivotal in its Asian stategy and they will have to invest throughout the downturn to ensure building a viable market share.
So now the ANZ have cut dividends, who is next? The Commonwealth and Westpac have intimated they may need to cut but I suspect NAB will be next to the table flagging a cut. Either way the coast is now clear and expect all the banks to flag a cut between 10-30% in the coming weeks.
ANZ profit to tumble
The ANZ Bank announced that their profits are likely to tumble in the vicinity of 15% for the first half amid increasing debt provisioning and risks associated with derivatives.
The ANZ along with all the other banks are being hit with increasing levels of bad and doubtful debts which are causing a dramatic increase in debt provisions amid the global economic slowdown.
NAB, Commonwealth & St George join in cutting rates
The National Australia Bank (NAB), Commonwealth Bank and St George joined Westpac and ANZ today by announcing rate cuts to their standard variable rates.
All major banks have now passed on the full 100 basis point cut to consumers.
NAB and Commonwealth have slashed their rates to 5.74% while St George have lowered their rate to 5.89%, the rate changes are effective from 13 February.
NAB and Commonwealth were at pains to point out that future interest rate cuts by the RBA may not be passed on in full to consumers as the demands and pressures on bank margins continue.
Westpac and ANZ first to cut
Westpac became the first of the banks to cut rates after the RBA announced a cut of 100 basis points to reduce the cash rate to 3.25%.
ANZ followed shortly after announcing a full cut of 100 basis points just like Westpac.
The ANZ and Westpac have lowered their rates to 5.91%. The ANZ announced the cut will take effect from 13 February and further cuts will be passed on subject to funding costs.
As at the time of posting the Commonwealth Bank and NAB have not announced a rate cut..
Opes Prime continues to haunt ANZ
US law firm Vianale & Vianale has filed a lawsuit against the ANZ in the US as the nightmare that was Opes Prime continues to linger for the ANZ.
The lawsuit filed on 29 December 2008 on behalf of purchasers of ANZ Bank’s ADR’s during the period of 2 March 2007 to 27 July 2008 continues the debacle that was Opes Prime.
Vianale & Vianale allege ANZ’s top executives violated the US securities laws by failing to adequately disclose the range of risks that arose from loans to Opes Prime.
ANZ have announced that will defend the lawsuit.
ANZ signs up Suburu Australia for car financing
ANZ’s Esanda has signed up Suburu Australia to the financing plan of the Federal Government’s $2 billion proposal to save the local car industry.
Subaru Australia’s current finance partner, General Motors Acceptance Corporation Australia (GMAC) will conclude their existing arrangement on 16 April 2009. The new 3 year arrangement with Esanda will take place after the current arrangement with GMAC concludes.
Australian Banks interest rate margins expand
With RBA interest rates now at 4.25%, the same rate that was in place in 2002 it is easier to make an assessment of the margins being charged by the Australian banks.
In 2002 the average standard variable interest rate offered by the big four banks was 6.07%. The current average standard variable rate is 6.82%, an increase of 0.75% from the levels of 2002.
The banks will put this down to the global financial crisis and while funding costs have indeed increased it also reflects an amount of margin creep.
It is estimated that about 90% of all lending is currently being done through the big banks while has heavily impacted the smaller lenders and the lack of funding options has rendered the smaller lenders to be unable to compete in the current environment.
Hence these small lenders have had to increase rates as they are unable to source funds as cheaply as the big banks. This has impaired the local lending market and once again given the banks the upper hand once again against the consumer.
Macquarie Bank follow ANZ & Westpac in bonds issue
Macquarie Bank became the third major Australian bank to issue bonds priced ar US$1.7 billion in the US Bond market as it’s rivals secured funding sources.
ANZ Bank earlier in the week issued bonds of US$1.75 billion, while Westpac followed shortly behind with a US$1.5 billion issue.