By Gareth Vaughan
ASB has issued NZ$250 million of ordinary shares to its parent after calling and repaying a NZ$370 million subordinated callable bond because, until the Reserve Bank's final Basel III standards are released, it doesn't have sufficient certainty to issue new Tier 2 capital, says treasury general manager Nigel Annett.
ASB's General Disclosure Statement (GDS) for the three months to September shows the bonds, issued in 2007 and paying investors 8.77%, were called on their reset/call date of November 15. On the same day the bank, ultimately owned by Commonwealth Bank of Australia, issued NZ$250 million of ordinary shares. See ASB's bond issuer profile here.
"As final Basel III standards have not been released, we don’t have sufficient certainty to issue replacement Tier 2 (capital) so NZ$250 million of ordinary equity was raised. The NZ$370 million subordinated debt was repaid. The capital structure of the bank is reviewed on an ongoing basis and will be again once final Basel III standards are released," Annett told interest.co.nz.
A Reserve Bank spokeswoman said the prudential regulator intends to release the final capital standards for the core Basel III capital adequacy requirements in early December. That's less than a month before it starts implementing Basel III from January 1, 2013.
From January 1 banks will be required to have a Tier One Capital Ratio, which represents shareholders' funds in the bank, of 8.5%, including a 2.5% Capital Conservation Buffer, which is up from the current 4% minimum. They'll also be required to have a Total Capital Ratio of at least 10.5%, up from the current 8% minimum. As of September 30 ASB's Tier One Capital Ratio was 11.2%, down from 11.7% at June 30, and its Total Capital Ratio was 12.4%, down from 12.6%.
In contrast to ASB, Kiwibank appears unconcerned by any uncertainty over final Basel III standards and is currently offering NZ$150 million worth of unsecured, subordinated bonds that will carry a speculative, or "junk," grade credit rating will pay investors' 5.80%. These bonds will be regarded as Tier 2 capital. See more on Basel III here.
Meanwhile, the latest GDS from ANZ Bank New Zealand Limited, formerly ANZ National Bank Limited, shows it paid its Australian parent dividends worth NZ$1.150 billion in the year to September. It's the first time ANZ NZ has paid NZ$1 billion in dividends since 2009.
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