MELBOURNE, Australia--A rebound by the biggest banks drove the broader Australian equity market higher Wednesday, lifted by a relief rally after a revised capital target set by the prudential regulator proved less onerous than feared.
After two straight days of losses, the S&P/ASX 200 climbed 44.7 points, or 0.8%, to finish near the session high at 5732.1.
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The four largest banks collectively added about 45 points to the index, offsetting weakness mining and energy companies and in the telecommunications sector as Telstra retreated for a seventh straight session.
The Australian Prudential Regulatory Authority ordered the banks to lift their capital benchmarks, effectively forcing them to hold billions of dollars more as a buffer against the risk of future crises, but gave them until 2020 to reach the threshold.
For the Big Four, the regulator said the banks should have a common equity Tier 1 capital ratio of at least 10.5%, about 1 percentage point higher on average than where levels were at the end of December. For other banks, it said it expected they would need to lift the ratio about 0.5 percentage point.
Each of the major lenders said they were well positioned to achieve the target, which analysts said was likely to be reached through retained earnings and possibly discounted dividend reinvestment plans rather than resorting to dilutive equity raisings.
Australia & New Zealand Banking, which is ahead of its peers in building capital as it finalizes several recent deals to sell operations in Asia, led the pack with a gain of 3.9%. Westpac Banking gained 3.8%, National Australia Bank added 3.1% and Commonwealth Bank of Australia climbed 3%. Shares of the four had all been lower over the last couple days.
Regional lender Bank of Queensland, which said it estimated it already met the new capital threshold, was 2% higher, and Bendigo & Adelaide Bank rose 0.6%.
In the materials sector, BHP Billiton dropped 1.1% after it reported a stronger final quarter of production to a broadly weak financial year. Rio Tinto lost 0.7% and South32 was down 1.7%. However, Fortescue Metals Group picked up 0.4% as Chinese iron-ore futures extended recent gains in the wake of recent positive economic data.
While Woodside Petroleum gained 0.5%, Oil Search and Santos fell 1.9% and 0.7%, respectively.
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(END) Dow Jones Newswires
July 19, 2017 02:52 ET (06:52 GMT)