TORONTO, Dec 8 (Reuters) - Royal Bank of Canada said on Monday it plans to issue up to C$2.3 billion ($1.8 billion) in common shares to bolster its regulatory capital ratio, in what would be the second-largest stock sale by a Canadian bank this year.
Royal Bank, Canada's largest bank, said after markets closed that it would issue 56.75 million common shares at C$35.25 a share, for proceeds of C$2 billion. An over-allotment option to the underwriting syndicate could push the total to C$2.3 billion.
The offering is expected to close on Dec. 22.
RBC shares closed at C$37.50 a share on the Toronto Stock Exchange on Monday, up 3 percent.
RBC's Tier 1 ratio was 9.0 percent and 'it seems like the market wants more,' said Ohad Lederer, an analyst at Veritas Investment Research in Toronto, adding that the RBC share issue could herald similar fund raising by a couple of other banks.
Toronto-Dominion Bank just issued C$1.4 billion worth of common shares in late November, and last January Canadian Imperial Bank of Commerce raised C$2.75 billion, the largest Canadian common share issue done in 2008. Insurance company Manulife Financial announced a C$2.125 billion share issue last week to boost its capital levels.
RBC and other Canadian banks reported lower fiscal 2008 fourth-quarter and full-year results last week.
Lederer said some RBC shareholders will likely be pleased that the bank is bolstering its capital base, but other shareholders will be unhappy with the dilution.
'Not only are the earnings going down, but you're now spreading it out over a broader shareholder base,' Lederer said. 'I think 2009 is not off to a great start.'
With the market seeking strong capital ratios -- 7 percent is the minimum Tier 1 capital ratio in Canada, but the banks are currently between 9.1 and 10.5 percent -- Lederer said others might follow RBC in tapping the market.
Bank of Nova Scotia and Toronto-Dominion Bank may be next to issue shares, Lederer said.
'I think it's probably a coin toss between those two,' he said.
Even though TD recently did a stock issue, its Tier 1 capital ratio at 9.1 percent is at the low end of the range for Canadian banks.
Similarly, Bank of Nova Scotia will be at the low end of the group, even after issuing common and preferred shares to life insurer Sun Life Financial for the purchase of a stake in money manager CI Financial, Lederer said.
($1=$1.25 Canadian)
(Reporting by Lynne Olver; editing by Peter Galloway) Keywords: ROYALBANKOFCANADA/ (lynne.olver@thomsonreuters.com; +1 416 941 8099; Reuters Messaging: lynne.olver.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Royal Bank, Canada's largest bank, said after markets closed that it would issue 56.75 million common shares at C$35.25 a share, for proceeds of C$2 billion. An over-allotment option to the underwriting syndicate could push the total to C$2.3 billion.
The offering is expected to close on Dec. 22.
RBC shares closed at C$37.50 a share on the Toronto Stock Exchange on Monday, up 3 percent.
RBC's Tier 1 ratio was 9.0 percent and 'it seems like the market wants more,' said Ohad Lederer, an analyst at Veritas Investment Research in Toronto, adding that the RBC share issue could herald similar fund raising by a couple of other banks.
Toronto-Dominion Bank just issued C$1.4 billion worth of common shares in late November, and last January Canadian Imperial Bank of Commerce raised C$2.75 billion, the largest Canadian common share issue done in 2008. Insurance company Manulife Financial announced a C$2.125 billion share issue last week to boost its capital levels.
RBC and other Canadian banks reported lower fiscal 2008 fourth-quarter and full-year results last week.
Lederer said some RBC shareholders will likely be pleased that the bank is bolstering its capital base, but other shareholders will be unhappy with the dilution.
'Not only are the earnings going down, but you're now spreading it out over a broader shareholder base,' Lederer said. 'I think 2009 is not off to a great start.'
With the market seeking strong capital ratios -- 7 percent is the minimum Tier 1 capital ratio in Canada, but the banks are currently between 9.1 and 10.5 percent -- Lederer said others might follow RBC in tapping the market.
Bank of Nova Scotia and Toronto-Dominion Bank may be next to issue shares, Lederer said.
'I think it's probably a coin toss between those two,' he said.
Even though TD recently did a stock issue, its Tier 1 capital ratio at 9.1 percent is at the low end of the range for Canadian banks.
Similarly, Bank of Nova Scotia will be at the low end of the group, even after issuing common and preferred shares to life insurer Sun Life Financial for the purchase of a stake in money manager CI Financial, Lederer said.
($1=$1.25 Canadian)
(Reporting by Lynne Olver; editing by Peter Galloway) Keywords: ROYALBANKOFCANADA/ (lynne.olver@thomsonreuters.com; +1 416 941 8099; Reuters Messaging: lynne.olver.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.