(Adds context on capital requirements)
Oct 9 (Reuters) - Commonwealth Bank of Australia on Wednesday announced a capital notes offering to raise about A$750 million ($505 million), as the bank attempts to beef up its capital in a tougher operating environment.
Lower interest rates and remediation costs for past misdeeds are expected to further dampen margins for Australia’s largest lender, following dismal earnings in August.
CBA said in a statement the “PERLS XII” capital notes will qualify as tier-1 capital, and are expected have a margin of 3% to 3.2% above the bank bill swap reference rate.
The raising follows the issue by CBA in September of about $2.5 billion worth of subordinated notes after Australia’s financial regulator told lenders in July that they needed to bolster capital to act as a buffer during a crisis.
The bank was also hit with an additional A$1 billion capital requirement last year after it was accused of thousands of breaches of anti-money laundering protocols.
CBA last week resisted passing on a quarter-percent Reserve Bank of Australia rate cut to its customers in full, with the two cuts before last week’s move already expected to eat into the lender’s margins.
The net proceeds of the notes offering will be used to fund CBA’s business, it said.
$1 = 1.4863 Australian dollars Reporting by Ambar Warrick in Bengaluru; Editing by Sandra Maler and Richard Pullin