National Australia to raise A$2b in placement

Wednesday 22nd July 2009

National Australia Bank, the region’s biggest lender by assets, plans to raise A$2 billion in a fully underwritten share placement to institutions, strengthening its balance sheet as it prepares to secure funding for the 2010 year.

The shares, which were halted for the bookbuild today, have gained 14% on the ASX this year and were at A$23.58 yesterday.

The placement is underwritten to a minimum A$21.20. In addition to the placement, the lender will offer A$750 million of stock to existing shareholders in a share purchase plan that isn’t underwritten.

The placement will lift NAB’s Tier 1 ratio as at June 30 to about 8.8% from 8.2%.

The measure of the lender’s health was set to weaken with the A$825 million acquisition of Aviva Plc’s life insurance and advisory units in Australia.

Revenue in the third quarter ended June 30 “was slightly lower than the first half run rate,” and cash earnings for the period were about A$900 million, reflecting “a solid performance under difficult economic conditions,” NAB said.

The lender will take a charge for bad and doubtful debts of A$1.06 billion for the third quarter. “As expected, asset quality has continued to weaken across all businesses reflecting the economic cycle,” it said.

NAB said it has achieved it’s a$19 billion funding target for 2009 and has now started pre-funding the 2010 year. So far this year, the bank has raised more than A$30 billion in term funding.

“The 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,” chief executive Cameron Clyne said in the statement.

The placement is underwritten by Deutsche Bank, Goldman Sachs JBWere and Merrill Lynch International (Australia). The lender said Australia’s economy “appears to be showing some signs of recovery, reflecting government policy initiatives and improving global sentiment.”

Still, “unemployment and credit quality trends, which tend to lag, both remain negative.” It said business lending has continued to grow though growth in the Australian mortgage market has been lower. Deposit volume growth has been “solid.”

Profit at National Australia fell 1.1% to A$2.66 billion in the six months ended March 31 after charges for bad and doubtful debts rose to A$1.8 billion.

Businesswire.co.nz

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