NAB to raise A$2.75 bln; mentions BNZ tax issue; BNZ's overdue debts up

National Australia Bank has announced plans to raise A$2.75 billion in equity from shareholders to strengthen its balance sheet, at least partly because of the potential liability from unpaid taxes by its New Zealand division, BNZ. NAB said the capital raising was mainly designed to strengthen its balance sheet to back further organic growth and some small acquisitions. It said the capital raising, made up of A$2 billion from institutional shareholders and A$750 million from smaller shareholders, would lift NAB's tier one capital ratio to 8.8% from 8.2%. "The desire to increase the Tier 1 ratio is consistent with the Group's intention to maintain a strong capital position through the economic cycle, accommodating volatility in core and non-core capital items and possible tax case provisions," NAB said. "More importantly, it supports organic growth and potential small inorganic opportunities (eg Australian distribution, brand and wealth opportunities, and small deposit and branch network extension opportunities overseas)," it said. Here is the full announcement on the capital raising and a trading update. NAB included the following brief outline of BNZ's progress in its trading update, including disclosure that BNZ's overdue debts had risen to 125 basis points by the end of June from 113 basis at the end of March. Here are the full comments from the NAB commentary.

The New Zealand economy is experiencing a protracted recession with lower commodity prices, higher unemployment and weak asset prices, but there are signs that conditions are starting to stabilise as lower interest rates and fiscal stimulus support demand. Growth in lending volumes has continued to slow, while growth in deposit volumes has improved. The ratio of 90+ days past due and gross impaired assets to GLAs increased to 125bps at 30 June 2009 (113bps at 31 March 2009). BNZ has maintained its prudent capital and liquidity positions.