Are ANZ (ASX: ANZ) shareholders about to be diluted with a capital raising?
What is ANZ?
ANZ is a leading Australian and New Zealand banking institution, with a presence throughout the oceanic region. ANZ is one of the Big Four Aussie banks and derives much of its revenue from mortgages, personal loans and credit.
What happened today?
Today, fellow major ASX bank NAB (ASX: NAB) announced a capital raising for $3.5 billion. That’s a big raising, representing around 7% of NAB shares. And it’s pretty dilutive because it’s being done at a 8.5% discount to the last closing price.
NAB said it was doing it to strengthen the balance sheet so that it would be able to weather whatever happens. There’s a lot of pain to come. We just don’t know how much yet.
What’s going to happen with ANZ?
Well no-one can truly know what ANZ will do, except ANZ’s leadership.
ANZ generates more of its profit from overseas than other big banks. So the Reserve Bank of New Zealand (RBNZ) move to ban dividends cuts off ANZ from one of its main profit centres. ANZ will still be generating profit, but it can’t be paid to the Australian ANZ HQ. It may need extra cash to make sure it gets through okay.
It has been pretty good since the GFC, but it has been retreating from Asia a bit in recent years.
We just don’t know what’s going to happen with COVID-19. That’s why I think it would be best to avoid the banks, even though the share price is down so much. Banks may not recover strongly or quickly from this period.
Technology shares could be much better with lower systemic risk and better growth prospects:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
