Westpac will raise its variable mortgage rates next month as part of its efforts to help meet increased capital requirements.
The bank’s owner occupier home loan variable rates will increase by 0.20 percentage points to 5.68 per cent on November 20, when residential investment property loan rates will go up by the same amount to 5.95 per cent.
“This is a difficult decision and one that is not taken lightly,” Westpac consumer bank chief executive George Frazis said.
The decision to raise rates came at the same Westpac announced a $3.5 billion equity raising in order to strengthen its capital reserves to meet new regulatory requirements.
The Australian Prudential Regulation Authority in July lifted the mortgage risk weights of the country’s top banks to bring their capital reserve levels in line with the world’s top financial institutions.
Australia’s second largest lender also reported preliminary results for 2015, with cash earnings for the year up three per cent to $7.8 billion. Statutory profit for the year rose six per cent from last year to $8 billion.
Westpac’s one-for-23 renounceable entitlement offer will comprise of an institutional and retail portion.
The institutional offer will be completed by October 15, with a shortfall bookbuild scheduled on October 16. The retail offering will open on October 23.
The shares will be priced at $25.50 each, implying a discount of 13.1 per cent on the dividend adjusted theoretical ex-rights price.
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Westpac shares, which closed at $30.44 on Tuesday, were placed in a trading halt shortly before the announcement.
The equity raised will add roughly 100 basis points to lender’s common equity Tier 1 (CET1) capital ratio, putting it within the top quartile of banks globally, Westpac said.
Westpac has raised $2 billion this year through a dividend reinvestment program announced at its half-year results in May. Last month, it raised another $1.32 billion from a capital notes offering.
Australia’s big four banks have raised a combined $17 billion in fresh equity since May this year, to boost capital reserves.
