SYDNEY: Australian banks have one year to raise US$7bil under new rules requiring a bigger cash buffer, a move widely expected to hit profits and push up mortgage rates, slowing a real estate rush that has economists warning of a property bubble.
The financial regulator also said large banks and mortgage rival Macquarie Group Ltd may have to raise more in future as the country shifts from letting property lenders decide cash reserves to making them follow global standards.
The Australian Prudential Regulation Authority's (APRA) July 2016 deadline for banks to have cash reserves at 25% of mortgage books, from 16% now, adds urgency to a sector-wide restructuring that has already seen lenders raising billions of dollars and selling assets in preparation.
However it will calm investors who have been wary of bank stocks since late 2014 when a government inquiry recommended the change, sending the sector down 8% since March, outpacing the broader market's 5.4% decline.
"It clears it out of the way," said Bell Potter banking analyst TS Lim. "There is enough time for the banks to get it in order. They are well prepared."
Shares in Commonwealth Bank of Australia, the biggest lender with a third of the A$1.2 trillion (US$884.04bil) mortgage sector, traded flat, in line with the market, as analysts said it can likely raise A$3.8bil with a dividend reinvestment plan.
Fellow "Big Four" lender National Australia Bank Ltd also traded flat. It has the least to raise, about A$480mil, since it recently closed a A$5.5bil rights issue and plans to list its UK unit.
Westpac Banking Corp shares fell 0.3%. The number 2 lender said it must raise A$3bil and was the most direct about raising mortgage rates, saying "the cost of holding higher capital will inevitably be borne by customers and shareholders".
The smallest of the four, Australia and New Zealand Banking Group Ltd, rose 0.8%. ANZ said it needs to raise A$2.3bil.
ANZ is considered most likely to pursue "inorganic" capital raising - a rights issue as opposed to dividend reinvestment - since it has kept less of its surplus capital as it pursues Asian expansion.
Macquarie Group, the only other lender to which the new rules apply, saw its shares rise 2% after it said it could cover extra capital requirements from reserves.
In a statement, APRA said the rules are an "interim measure" since the Basel Committee of global bank supervisors will finalise a set of capital rules later this year.
"Further changes to mortgage risk weights will be considered over the medium term in the context of these broader international developments," APRA said. - Reuters
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