(Adds analyst comment, writes through)
By Shriya Ramakrishnan and Ambar Warrick
Nov 5 (Reuters) - Australia's Westpac Banking Corp WBC.AX on Tuesday said it completed a discounted A$2 billion ($1.38 billion) equity placement, and its shares suffered their worst drop in nearly a year, also reflecting a 15% slide in annual profit reported on Monday when the stock was halted.
The issue price for the placement was on par with its underwritten level of A$25.32 a share, which was at a 9% discount to Westpac's closing price on Friday. Westpac shares, which resumed trading on Tuesday, slipped as much as 5.1% to A$26.460, the biggest drop since November 2018.
"That's a big issue, and it was a big discount. I'm sure that some people that took the placement were throwing that stock out into the market to take advantage of the discount," said Henry Jennings, portfolio manager at Marcustoday Financial Newsletter.
Jennings said dilution was playing a part in the share movement, while the earnings drop showed the bank was facing "some serious headwinds."
Along with announcing on Monday annual results and a dividend cut for the first time in a decade, the country's No.2 lender announced a A$2.5 billion capital raising, as it looks to beef up its capital levels amid tougher regulatory requirements. capital raising also includes a non-underwritten share purchase plan through which the lender is targeting to raise an additional A$500 million.
Westpac's results came just days after its smaller peer Australia and New Banking Group ANZ.AX also missed profit expectations.
Australia's "Big Four" banks are having to hold more capital at a time of record low interest rates, subdued credit growth, increasing competition and regulatory scrutiny after a government-backed inquiry into the financial sector exposed widespread misconduct.
($1 = 1.4531 Australian dollars)