Westpac yesterday easily sold $2.5 billion in new shares to institutional investors at $16 a share (and at a discount of 10.5 per cent to Monday's closing price) in a step that confirms that there is ample capital available to banks, and that equity investors are expecting banks to ask for yet more. On top of the institutional offer Westpac plans to sell another $500 million to retail shareholders under a share purchase plan, with the investment capped at $10,000 each.The bank raised roughly $1.3 billion in capital last month by selling new shares equal to the dividend distributed (and about $890 million more in capital than would have flowed back given the actual investor demand to buy new shares under the dividend reinvestment plan). The two new share issues will lift Westpac's level of tier one capital to a $23 billion base and its pro-forma tier one capital ratio (using the September 30 accounts, and pre the St George merger) to around 8.3 per cent.Westpac did not conduct a market briefing on the capital raising but offered three reasons in its announcement published through the ASX: deteriorating credit conditions, opportunities for growth (given the maturity of corporate bonds and the restricted lending by foreign banks) and the awful cost of hybrid capital.Westpac slipped in to the announcement that it planned to make $500 million in "fair value" adjustments following the takeover of St George, which is almost as much as St George's current level of provisions for credit losses, or equal to about two and a half month's profit for its new subsidiary.The bank said the trend in earnings in the first two months of its financial year was consistent with the second half of its 2008 year and noted the impact of higher impairment provisions, including increased provisions for ABC Learning and Allco Finance Group as well as one corporate downgrade assumed to be Babcock & Brown.