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Why CBA should do a $10 billion rights issue

Christopher Joye

Coolabah Capital

In The AFR today I address the uncertainty swirling around APRA's finding that the major banks are short 200 basis points of "capital" and speak to a large institutional investor who thinks CBA should take the cheapest equity in history off the table via a $10 billion rights issue. The short story is that APRA believes it's reasonable to assume the majors will need to lift their Common Equity Tier 1 (CET1) capital ratios by "at least" 200 basis points, although it has been deliberately vague because it does not know where the final CET1 ratio will end up under the incoming banking rules called Basel 4. It's entirely possible that the total CET1 and hybrid Additional Tier 1 (AT1) equity capital requirements under Basel 4 are 300 basis points or more, which is why 200 basis points of CET1 is the minimum APRA expects the banks to source. Read the full AFR article for free by clicking twice here: (VIEW LINK)

Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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