The problem for many is that with the recovery in share prices following the Global Financial Crisis existing bank share holdings already make up a high proportion of their share portfolios.

Especially for investors whose portfolios are already overweight in Australian shares, despite the high current bank dividend payouts, the incentive to pass up the new investment opportunity is strong. Investors in the National Australia Bank new issue have seen the share price retreat since the time of that issue.

Similarly, ANZ Banking Group share price fell considerably after a raising from institutional investors. Small investors are now being offered a share purchase plan to acquire up to $15,000 of new shares at the now lower share price.

The question for eligible shareholders to consider is whether the share price could fall further if, for example, the new issue reduces future per share earnings and dividend payouts.

Whereas a decision not to participate in a share purchase plan provides no immediate benefit to shareholders, the Commonwealth Bank of Australia (CBA) renounceable rights issue provides some compensation for investors who choose not to participate. Because the rights are renounceable, the entitlement can be sold on the share market and the investor pockets the cash received after paying brokerage and any relevant income tax.

The CBA offer also assists smaller investors by selling any entitlements not taken up and paying the net proceeds to relevant shareholders. Thus, unless the CBA share price tanks below the discounted new issue price, there is at least some return to investors who do not participate in the new issue.

As would only be expected, the pressure from the Australian Prudential Regulation Authority (APRA) on the big four banks to increase their capital resource has focussed investor attention on the likely impact of their future profitability. The purpose of the higher capital is to ensure that the big four have the financial capacity to absorb future losses, particularly from their large mortgage lending book.

Among other things, this has led to bank share analysts questioning how long the current historically low provisioning for bad debts will continue. With the burgeoning mortgage books in a period of buoyant house prices, the risks of future bad debts are increasing, which is presumably behind APRA's pressure to increase capital reserves.

At a personal investment level, while the prospect of a high franked dividend yield is tempting, when deciding whether to participate in banks' new share issues, investors need to be aware of the difficulties facing the banks in maintaining and enhancing their profitability.

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Daryl Dixon is the executive chairman of Dixon Advisory