UPDATE 1-ANZ to raise $696 mln in convertible share issue

* ANZ launches A$750 mln hybrid offer

* Issued aimed at boosting Tier 1 captial (Adds details, background)

SYDNEY, Nov 10 (Reuters) - Australia and New Zealand Banking Group Ltd (ANZ.AX) launched a A$750 million ($696 million) convertible preference share issue to boost its capital, it said in a statement on Tuesday,

The proceeds from the offer would help ANZ replenish some of the about A$1 billion worth of hybrid capital redeemed in the past six months, ANZ said, adding that the preference shares would convert into ordinary shares in December 2016.

The offer, which opens on Nov. 18, is expected to have a margin of 3.10-3.30 percent.

ANZ's new offer would qualify as Tier 1 capital, which is the core capital of a bank and is commonly used by regulators to assess banks' capital adequacy.

Banks are required to maintain Tier-1 capital as a buffer to protect bank deposits and may opt to keep even higher ratios should they consider acquisitions or if they anticipate a rise in non-performing loans.

Analysts expect more hybrid issues from Australia's other top banks before the end of the year.

ANZ, Commonwealth Bank, Deutsche Bank, Goldman Sachs, Macquarie Group, Morgan Stanley, Westpac and UBS are the joint lead managers to the offer. ($1=1.077 Australian Dollar) (Reporting by Denny Thomas;)