Westpac prepares viability and pricing of a new offering

Westpac is looking to begin a hybrid issuance of AUD 1bn ($760m); the bank had last week told investors it was mulling over the refinancing of these preferred securities, which were issued a decade ago and will no longer qualify as regulatory Tier 1 capital from June 30th.

Westpac Banking Corp is preparing to kick off a hybrid issue in the order of $1 billion within the next two weeks, according to sources.

The lender, which started bank reporting season on Monday, is understood to be mulling the viability and pricing of a new offering and is preparing to pull the trigger if the stars align.

In a presentation to investors on Monday, Westpac flagged a potential refinancing of its $755 million trust preferred securities.

Brian Hartzer, chief executive officer of Westpac Banking Corp, is plotting a hybrid. Bloomberg

Those securities were issued a decade ago and will no longer qualify as regulatory Tier 1 capital from June 30. The good news for the banks is that the hybrid market is in the midst of one of its strongest rallies in recent years.

The average trading margin of major bank hybrids and capital notes has declined from a peak of 5.42 percentage points over the bank bill rate in mid-February to about 4.32 per cent, according to Bell Potter.