Kiwi tax loss behind $2.5b Aus bank capital raising

National Australia Bank today cited the tax case it lost in New Zealand as a reason for raising new capital and said there are signs that the New Zealand economy is starting to stabilise.

The Melbourne-based bank released a third quarter update of its business along with an announcement of an underwritten A$2 billion ($2.52 billion) institutional sale of shares and non-underwritten share purchase plan capped at A$750 million.

The share sale follows an A$3b issue in November and took some analysts by surprise, Reuters reported.

The bank said growth in lending volumes in its New Zealand business have continued to slow, while growth in deposit volumes have improved.

"The New Zealand economy is experiencing a protracted recession with lower commodity prices, higher unemployment and weak asset prices, but there are signs that conditions are starting to stabilise as lower interest rates and fiscal stimulus support demand".

The ratio of 90 days past due and gross impaired assets to gross loans and acceptance increased to 125 basis points at June 30 from 113 basis points at March 31 in New Zealand, the bank said.

The National Australia Bank statement said there was potential for a New Zealand tax case to affect capital in the foreseeable future, should provisions be taken.

Last week Bank of New Zealand lost a court cost which could cost it $654m in unpaid tax and interest and more in penalties.

It is one of a number of banks facing similar cases over international structured finance transactions. The banks are treating the cases as contingent liabilities.

BNZ said it was likely to appeal.

National Australia Bank reiterated today that the BNZ has maintained its prudent capital and liquidity positions.

National Australia Bank chief executive Cameron Clyne, who used to run BNZ, said the Australian bank's businesses were continuing to deliver solid performances despite the subdued economic environment.

The capital raising ensured the bank maintained a strong balance sheet and provided flexibility to pursue opportunities.

- NZPA