National Australia Bank (NAB) will raise approximately A$750m ($504m) through capital notes issue, Reuters has reported.

The bank will use the funds to refinance debt in order to comply with toughened capital requirements.

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Once issued, the capital notes would qualify as additional Tier 1 capital for the group, the bank told the publication.

The Australian banking group’s capital levels have come under pressure as it had to cough up A$2.07bn to compensate aggrieved customers after a probe in 2019 exposed extensive misconduct in the financial sector.

The Reuters report added the lender also launched the resale of capital notes worth A$750m.

Last week, the Melbourne-based lender posted a flat first-quarter net profit of A$1.7bn, and cash earnings of A$1.65bn.

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The banking group’s CET1 ratio was 10.6% as against 10.4% in September 2019, which includes $0.7 billion of the second-half of 2019 Dividend Reinvestment Plan underwrite proceeds.

In December last year, NAB’s rival Westpac raised nearly A$770m ($526.53m) through the share purchase plan (SPP).

As part of the SPP, the bank issued 31.9 million new shares to successful applicants.

In December last year, the Australian corporate regulator filed a civil lawsuit against NAB for ‘fees for no service’ and related failures.

In a statement, the Australian Securities and Investments Commission (ASIC) alleged that NAB was involved in Fees for No Service Conduct from December 2013 to February 2019.

The lender charged a large number of its customers for financial planning services that were not provided to them.

In the same period, NAB failed to issue or issued defective fee disclosure statements (FDSs) with false or misleading representations.