Westpac, Australia's No. 2 lender by market value, on Wednesday said it will raise A$3.5 billion ($2.54 billion) to meet new stricter capital rules while pushing home loan rates higher by 20 basis points.
It set the price of the fully underwritten rights issue at A$25.50 per share, a 16.1 percent discount to Tuesday's close of A$30.44. The fund raising will add about 100 basis points to Westpac's common equity Tier-1 ratio, taking it to over 14 percent on an internationally comparable basis.
The move comes after the Australian Prudential Regulation Authority in July demanded that banks set aside bigger cash buffers against their mortgage books, a key source of revenue, amid fears of a house price bubble.
Westpac was widely expected to raise about A$3 billion by November after heavy-lifting by rivals earlier this year. But analysts lauded the bank's move to increase variable home loan and residential investment property loan rates by 20 basis points, effective Nov. 20.