ANZ NZ to offer $250m in preference shares to bolster balance sheet

ANZ NZ is raising $250m to meet more stringent Reserve Bank requirements. Photo / File

ANZ Bank New Zealand is raising $250 million to shore up its balance sheet to meet more stringent Reserve Bank capital requirements.

The bank is offering perpetual preference shares (PPS) - equity with bond-like characteristics - to New Zealand retail and institutional investors.

The shares will constitute additional tier 1 capital for ANZ's regulatory requirements, ANZ said.

Harbour Asset Management's fixed income and currency strategist Hamish Pepper said the wholesale interest rate markets - domestically and globally - were increasingly becoming the preferred choice for corporates to raise funds.

"The revealed preference that we have seen from banks this year has been to pull the wholesale market lever a little bit more," he said.

ANZ's preference shares will not have a fixed term and will remain on issue indefinitely if not redeemed by the bank.

If certain conditions are met, ANZ may redeem shares on July 18, 2028, and each quarterly scheduled distribution payment date after that date.

The offer is expected to close on July 7.

The indicative issue margin for the PPS is 3.25 per cent to 3.45 per cent a year.

There is no public pool for the offer, with all of the PPS being reserved for clients of the joint lead managers, NZX participants and other approved financial intermediaries.

ANZ said the offer will raise additional tier 1 capital to help ANZ meet its regulatory capital requirements and manage its capital position.

Proceeds will also be used for ANZ's general corporate purposes.

As of this month, locally incorporated registered banks in New Zealand must comply with Reserve Bank minimum capital ratios, which are calculated as the amount of capital that must be held in relation to risk-weighted exposures.

Tier 1 capital is a bank's core capital and protects it against unexpected financial losses.

It is made up of common equity tier 1 capital which is seen as the highest quality of capital and includes retained earnings - the money a bank keeps aside from making a profit and the shareholders' investment or ordinary shares.

It also includes additional capital which is made up of preference shares, although this is not seen to be as good as common equity.