Australia's Suncorp and Westpac eye Tier 1 issues

SYDNEY (Reuters) - Suncorp-Metway (SUN.AX) and Westpac Banking Corp (WBC.AX) could soon announce Tier 1 capital issues to bolster their balance sheets, several market sources said, injecting new life into Australia's moribund markets.

Details on the deals' timetables were not available but both borrowers have mandated banks to arrange the offers, said the sources.

Suncorp, Australia's biggest home and car insurer, has hired Citi, JPMorgan, Macquarie and UBS, according to a source.

The offer is likely to be driven by retail demand rather than institutional investors, one source added. The planned issue was flagged by Suncorp's Chief Financial Officer Chris Skilton in February.

Westpac, the country's fourth-largest lender, is in the early stages of planning a Tier 1 issue, market sources said.

Details on the mandated banks were not available.

Tier 1 is a form of capital that banks are required to maintain for their operations. It is the closest type to equity and is also the most expensive form of debt for the bank.

No Tier 1 issues have been sold in Australia in 2008 amid the global credit crunch, which has unnerved investors and pushed up funding costs sharply.

Suncorp-Metway and Westpac declined to comment.

Banks around the world have been raising new capital to shore up balance sheets badly hit by losses in U.S. subprime and leveraged loans. Australian banks have escaped relatively unscathed but are increasing provisions against bad loans.

($1=A$1.06)

(Reporting by Cecile Lefort)