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Westpac shares on watch after raising $770 million

Westpac Banking Corp (ASX: WBC) shares are on watch this morning after the bank completed its $770 million capital raising.

What did Westpac announce yesterday?

Westpac successfully completed its share purchase plan (SPP) and raised $770 million.

The issue price is $24.20 per share, representing a 2.0% discount on Westpac’s 5-day volume weighted average price (VWAP) to 2 December.

Disappointingly, the SPP offer was made to 618,300 eligible shareholders with only 40,900 applications made. That represents a 7% participation rate, which could put Westpac shares under pressure this morning.

Westpac had initially planned to raise $500 million under the SPP with a further $2 billion from institutional shareholders.

The bank reported $68 million in withdrawals after announcing shareholders would have that option in the SPP. That came after the alleged Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act breaches and subsequent investigations into the bank.

Why does Westpac need fresh equity?

Westpac launched a $2.5 billion capital raising in November to provide a further buffer to APRA’s required benchmarks.

APRA requires systematically important banks such as Westpac to have a common equity tier 1 (CET1) ratio of 10.5% by 1 January 2020.

The Aussie bank reported a CET1 ratio of 10.67% at 30 September 2019 but is facing a potentially huge fine from APRA for the alleged AUSTRAC breaches.

Westpac is accused of 23 million breaches of the AML/CTF Act in relation to its international money transfer system.

The scandal has already claimed the scalps of CEO Brian Hartzer and Chairman Lindsay Maxsted. Both executives have announced their plans to resign following the explosive scandal.

How have Westpac shares performed this year?

Any hopes of a rebound in Westpac shares have been dashed by the recent AUSTRAC scandal.

The Westpac share price is down 1.10% this year, but isn’t the only ASX bank to be struggling.

Macquarie Group Ltd (ASX: MQG) is the only one beating the ASX 200 this year with its share price gains of 26.70%.

Bank of Queensland Ltd (ASX: BOQ) is down 23.24% since January, while Commonwealth Bank of Australia Ltd (ASX: CBA) is the best performing big four bank with its 11.64% gains this year.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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.

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