MENU

Are CBA, Westpac, ANZ and NAB about to leave New Zealand?

Readers may remember that the Reserve Bank of New Zealand (RBNZ) has proposed that banks have to hold more capital to be even safer than they already are.

This has led some market commentators to speculate that Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank (ASX: NAB) will leave New Zealand. I suppose ANZ Bank would become Australia Banking Group if that were to happen?

According to Bell Potter, the RBNZ’s proposal would increase the minimal capital required by the big four ASX banks from 10.5% to 18%, with the Tier 1 component rising from 8.5% to 16%. Bell Potter has estimated this would mean around $18 billion more of Tier 1 capital.

As a result, this would mean ANZ New Zealand needing to raise around $6.7 billion, NAB New Zealand needing to raise $4.4 billion, CBA needing to raise $3.9 billion and Westpac needing to raise $3 billion according to Bell Potter.

You can easily see this would not be a popular move for the big banks as it would significantly decrease the potential returns.

It’s because of this that there is talk of the big four ASX banks divesting their Kiwi operations to absolve themselves of the funding requirements.

However, New Zealand is a profitable segment for the big ASX banks, so divesting their Kiwi subsidiaries could lead to lower a return on assets and return on equity.

Foolish takeaway

The banks are suffering potentially less attractive operating conditions on all sides. If banks leave New Zealand then most of their eggs will be in the Australian mortgages basket. This could be a dangerous move with Australian dwelling prices continuing to fall.

That’s why, if you’re looking for blue chip investment returns, I’d rather go for one these quality ASX stocks instead.

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked...

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2019."

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!