LONDON: Nationwide, Britain’s biggest customer-owned financial services group, is drawing up plans to raise at least £1bn ($1.5bn) to fill a hole in its balance sheet, the Sunday Times said.
Nationwide must raise additional capital of £400m in order to meet a new target for banks to hold core Tier One capital equivalent to seven percent of their risk-weighted assets, Britain’s financial regulator said last week.
In addition, Nationwide must raise extra capital to meet another new requirement by the Bank of England for banks to have a leverage ratio of at least three percent. Its leverage ratio currently stands at two percent.
The leverage ratio measures capital against total loans, not adjusted for their supposed riskiness, and some bankers argue it penalises low-risk, high volume businesses like mortgage lending. Nationwide is Britain’s third-biggest home loans provider.
Chief Executive Graham Beale has said the leverage ratio is “crude” and “an unsophisticated measure which ignores the quality of an organisation’s assets”.
A Nationwide spokesman said the Sunday Times report was “speculative”. “We are completely confident of meeting the three percent ratio target in good time for its introduction as a regulatory measure. We have a wide range of options which we will build into any plans which we devise,” he said.
Nationwide said in May that it planned to raise up to £500m through an issue of so-called core capital deferred shares (CCDS). The Sunday Times said it could issue a £500m bond within weeks followed by a second bond to raise between £500m and £1bn pounds.
Reuters
