Commonwealth Bank's investors deliver embarrassing snub over $3bn share issue
Commonwealth Bank of Australia suffered an embarrassing snub after investors took up only half of the shares from an expected AUD 3bn ($2.12bn) rights entitlement offer, despite the discounted rate, due to stock market concerns and an uncertain outlook for the bank. Commonwealth Bank was thereby left with a AUD 1.5bn ($1.06bn) hole in its capital raising plan, which led to shares being halted as it decided to offer the unwanted shares to other investors so as to repair the damage. The bank's total target of capital raising is $5.1bn ($3.6bn), and with today's sale, combined with the institutional raising, the bank will have so far collected AUS$3.6bn ($2.5bn). Commonwealth Bank is the last of the four big banks to reveal its capital plans so as to meet APRA's new capital raising rules. &nbsp;
Small investors have delivered an embarrassing snub to Commonwealth Bank after only half the shares from an expected $3bn rights entitlement offer were taken up by shareholders despite a discounted rate.

Stock market volatility and the uncertain outlook for Australia’s banks have been blamed for the rejection which left the bank with a $1.5bn hole in its capital raising plan.

Shares in Australia’s biggest bank were halted from trade on Friday as the lender said it would offer the unwanted $1.5bn worth of shares to other investors to repair the damage.

The large shortfall in the take-up by retail shareholders was blamed on the timing of the offer and weaker valuations for bank shares, analysts said.

“Unfortunately for them, it was very bad timing as the market has been very volatile,” IG market analyst Angus Nicholson said.

“Bank valuations have also corrected sharply as their growth outlook has worsened.”

The big four banks have been investor magnets due to attractive dividend yields, but their shares have tumbled as much as 15% since early August.

All four are currently trading below their long-term average price to earnings ratios, as investors have increasingly questioned their growth prospects amid weaker economic conditions.



The uncertainty gripping the market continued on Friday. The S&P/ASX200 fell 0.47% to 5,071 points amid speculation about whether the US Federal Reserve will raise interest rates next week.

CBA launched its $5.1bn raising in August to comply with a move by the Australian Prudential Regulatory Authority to bring the big four’s capital reserve levels into line with the world’s top financial institutions.

The bank first raised $2.1bn from institutional shareholders, but its retail offering was caught up in market volatility in recent weeks.

During the raising window, CBA shares have traded as low as $71.97 each, barely above the $71.50 discounted price offered under the capital raising, prompting many investors to ignore the offer.

The lender expects the retail bookbuild to be completed by 14 September, and the entire $5.1bn capital raising is fully underwritten.

Completing a bad day for the bank, customers were furious when a problem with electronic transactions left customers stranded in the midst of the morning rush hour unable to pay for purchases.

The technical problem, which lasted for about three hours on Friday morning, affected credit cards, EFTPOS, net banking and travellers cards.

CBA customers struggled to make payments in shops and cafes, and were quick to vent on social media.

CBA responded to tweets from customers with apologies and a spokesman confirmed that services were returning to normal.

The spokesman confirmed that some CBA customers had been experiencing intermittent issues throughout the week but it was “very dependent on the individual”.



