In a statement to the ASX, Westpac said it will raise $3.5 billion in equity, adding approximately 100 basis points to the institution’s common tier 1 capital (CET1) ratio.
“Capital raised responds to changes in mortgage risk weights that will increase the amount of capital required to be held against mortgages by more than 50 per cent, with the increased regulatory requirement to be applied from 1 July 2016,” the statement said.
Westpac securities have been placed on a trading halt until the institutional component of the entitlement offer is completed, with trading expected to recommence on Monday 19 October 2015.
In further response to regulatory changes, Westpac has increased its variable home loan and residential investment property loan rates by 20 basis points, which will take effect from 20 November 2015.
Westpac consumer bank chief executive George Frazis said: “As we have always said publicly, while Westpac is well placed to meet these changes, a significant increase in capital ultimately increases the cost of providing home loans to customers.”
“Increases in the cost of doing business inevitably influence business decisions, including price,” he said.
Mr Frazis noted that in response to regulatory changes, the total amount of capital raised this year is about $6 billion.
Westpac previously generated approximately $700 million from the sell-down of its majority holding in BT Investment Management in June 2015.
Changes to capital requirements were set out by the Financial System Inquiry in December 2014, recommending that Australian banks should have capital ratios that position them in the top quartile of international banks.
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