A major firm has acted on the latest major bank ECM by Commonwealth Bank.
CBA has been the latest major bank to undertake a capital raising following an APRA announcement, requiring an increasing in the amount of capital required for Australian residential mortgage exposures by authorised deposit-taking institutions.
“The CBA capital raising is significant as it's the second-largest rights issue in Australian history,” said lead partner on the transaction, Sarah Dulhunty.
“CBA is raising capital to meet future requirements, including the change to average mortgage risk weights for Australian residential mortgages announced by Australian Prudential Regulation Authority (APRA) in July this year.”
Underwritten by Morgan Stanley and UBS, the 1 for 23 PAITREO will be used in the ongoing funding of the bank’s business. CBA Equities Limited, Goldman Sachs, Morgan Stanley and UBS AG, Australia Branch were the Joint Lead Managers.
“The capital raising will strengthen CBA's internationally comparable capital ratios and places CBA in the top quartile of its international peers in relation to its capital levels as recommended by the Financial System Inquiry,” said Dulhunty.
“The four major banks are under regulatory pressure to increase capital levels which has already resulted in prior capital raisings by NAB (a rights issue) and ANZ (a placement and share purchase plan) and Westpac (a partially underwritten DRP). We may see further action from Westpac to strengthen its capital position,” she added.
Herbert Smith Freehills acted for CBA.