Sales of Australia bank shares to exceed post-crisis rush

Sales sparked by rule change.

Australian banks are on well track to sell more equity than they did after the global financial crisis as a stricter capital requirement opens the floodgates of fund-raising activity.

According to a research note from SNL Financial, Australian banks have raised A$9.28 billion in common equity in 2015 in offerings excluding dividend reinvestment schemes.

This is more than 6x the full-year amount in 2014 and the most since 2009 when they issued A$13.01 billion of shares, according to data compiled by SNL Financial.

And issuance in 2015 is set to surpass the 2009 total. Commonwealth Bank of Australia on Aug. 12 announced a plan to sell about A$5 billion of stock in a rights offering, joining Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. in tapping the market to boost capital.

A successful share sale by Commonwealth Bank of Australia would raise the year-to-date tally in 2015 to more than A$14 billion.

Here's more from SNL Financial:

Westpac Banking Corp., which rounds out the four biggest Australian banks by assets, so far has only utilized a dividend reinvestment program to issue A$2 billion of shares, but expectations are growing the company will also follow in the footsteps of its peers.

Australian banks last made moves of this magnitude when they were coping with the immediate aftermath of the global financial crisis. This time around, the direct catalyst is the Australian Prudential Regulation Authority's July decision to raise the risk weight of mortgages for the country's five biggest banks to rein in risks from a heated property market, which knocked down their capital ratios.

The rule change is the latest in efforts to build a banking system with a robust capital buffer. The APRA estimates that Australian banks will need to boost their capital adequacy ratios by at least 200 basis points to become "unquestionably strong," as recommended by a government-initiated panel. For the top four designated as domestic systemically important banks, the regulatory environment is turning even tighter, with months left before additional capital requirements due to kick in.

Pressure will only grow on Australian banks to boost capital, as the APRA has made it clear that the tightening of mortgage risk weight rule is just an interim measure and new regulatory initiatives, under a regime loosely dubbed Basel IV, will result in still tougher capital requirements, said Tim Roche, senior director of financial institutions at Fitch Ratings.

"The banks are likely to look at a number of different measures to raise the capital," he told SNL, adding that asset sales are also a possibility.

NAB moved ahead of the APRA, raising A$5.5 billion in the country's largest ever rights offering, which was completed in June.

ANZ then got in on the action, with a A$3 billion share sale plan. On Aug. 7, the lender completed the institutional portion of the offering and added A$2.5 billion to its balance sheet.

More will likely follow. ANZ, for one, will need another A$4 billion in fresh capital over the next two years, David Ellis, head of Australian banks and insurers at Morningstar, told SNL.

"All four major banks will be raising capital over the next two years, and there is plenty of capacity and demand from retail and institutional investors to satisfy this capital raise," Ellis said.