Banks raise cash as bad loans grow

Commonwealth Bank of Australia, Westpac Banking Corp and Australia & New Zealand Banking Group Ltd raised $6.7 billion this week selling stock and bonds to boost balance sheets dented by rising defaults.

Commonwealth said yesterday it will sell up to A$750 million ($496 million) in stock to Merrill Lynch & Co and priced A$2.7 billion of bonds, including A$2.2 billion of government-backed notes. Westpac, the biggest bank, sold A$2.5 billion in stock and $1.5 billion of notes, sending its shares 8.5 percent lower. ANZ, the No 4 bank, sold $1.75 billion of debt.

"The spate of raisings hints that bad debt provisions will have to rise in the face of a weakening economy," said Hans Kunnen, head of investment market research at Colonial First State Global Management, which manages $86 billion. "Banks are setting themselves up for a difficult period ahead amid a very tough funding climate."