Bendigo NAB

Hybrid/Fixed Interest trading update – NAB raises $750m in Capital and announces new Hybrid.

National Australia Bank announced a new NAB Capital Note 3 offer this morning. The first call date is 17th June 2026, making it a seven-year conversion maturity, with a Mandatory Conversion Date of 19th June 2026. The expected margin is between 4.00% to 4.20%. Adding the base bank bill rate of 2.02%, the total yield (including franking credits) is going to be between 6.02% and 6.22%.

This issue will be the longest conversion maturity date within the major-bank hybrid universe, being nine months longer than the 22nd September 2025 WBCPH. The Westpac hybrid is currently yielding approximately 5.75%, so NAB is offering a reasonable pick up in yield making the issue likely to be well supported. Note the yield graph below, with all issues currently below the 6% level.

Interestingly, NAB has maturing NABPA’s in March, with NAB announcing that a nominated purchaser will re-purchase the maturing notes, as expected, but will convert $750m of those notes into Ordinary Shares. This increases Common Equity Tier 1 capital by 19 basis points. This conversion contributes to the 10.5% ratio requirement by January 2020, in line with APRA’s requirement for Unquestionably Strong capital levels.

With this capital raising exercise by NAB, expect further issues of bank capital by the majors this month and for the rest of the year. Also, Australian Securities and Investments Commission have confirmed the regulator would seek to enforce stricter rules on how banks assess the personal expenses of potential customers if its Federal Court action against Westpac fails (source: Domain).

Understandably, with the Banks issuing capital and tougher lending rules, the banks’ share prices under a bit of pressure this morning.

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