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ANZ expects lower CET1 ratio on higher capital requirement for mortgages

Australia & New Zealand Banking Group Ltd. expects its common equity Tier 1 ratio to take a hit after it revised its mortgage capital model to meet the Australian Prudential Regulatory Authority's higher capital requirement for mortgages.

The bank in a June 1 release said adoption of the new model is expected to reduce its level 2 common equity Tier 1 ratio by 26 basis points based on its balance sheet as of March 31. This represents an average risk weight applied to the Australian mortgage portfolio of around 28.5%.

However, ANZ noted that there is no need to raise additional capital as the impact of the change is consistent with its 2017 capital management plan.

APRA had in 2016 reaffirmed higher risk weight targets for Australian residential mortgages. ANZ received approval from the regulator for its new mortgage capital model and said it will implement the new model in June.