Nab Shares Plunge 13.5%

The Age

Saturday July 26, 2008

Ruth Williams

NATIONAL Australia Bank shares have had their biggest one-day loss since the 1987 sharemarket crash, after the bank said it might lose more than $1 billion in investments linked to the distressed US mortgage market.

NAB shares lost almost 13.5%, or $7 billion, to close $4.14 lower at $26.56 - a bigger loss than those sparked by NAB's 2004 rogue trader scandal, its $3 billion-plus write-off in 2001 of its investment in US mortgage lender Homeside, and the September 11 terrorist attacks.

Australia's other big banks were hammered, with ANZ losing $1.70, or 8.7% - also its biggest fall since 1987 - CBA $3.14, almost 7%, and Westpac about 3%. The benchmark ASX-S&P 200 closed 3.4% down, its biggest fall in six months.

The share plunges came after another bad session on Wall Street on Thursday night that left bank stocks reeling in the wake of the latest US housing sales figures that showed a huge pipeline of houses unsold and steep falls in prices.

This prompted NAB to reveal it may lose up to $1.01 billion on its complex investments derived from mortgages in the US, where defaults and foreclosures are soaring. An analyst warned that up to 25 million homes were at risk of negative equity.

"This gives me no pleasure, but I believe it's the right thing to do," NAB chief executive John Stewart said. The impact on NAB's full-year earnings would be slightly less than $600 million, he said, and NAB's dividend would be unaffected.

He said NAB "did not need to raise mortgage rates right now", but warned that the cost of credit for all banks had risen. But rating agency S&P said NAB's announcement might reduce investor confidence in the bank, which would "put pressure" on funding and costs.

© 2008 The Age

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