Nab Eyes Bail-out Funds

Sydney Morning Herald

Tuesday September 30, 2008

Jacob Saulwick

THE relative immunity of Australian banks to the souring of US home loans means the sector is unlikely to draw any immediate joy from the American rescue pool, although the National Australia Bank is the most likely beneficiary.

Banks that appeal for funding must have "significant operations" in the US. Last year NAB bought the Great Western Bank for $US800 million. But analysts are unsure if the South Dakota bank is significant enough to allow NAB access to the US bail-out. Ironically, if NAB did gain access to the funds it would not be because of troubles at Great Western. Instead, it would be because of bad investments made in other parts of NAB's operations.

The NAB has written down - or said it is preparing to lose - about $1 billion on its exposure to loans linked to subprime mortgages. While this represents about 90 per cent of the original value of the investments, the bank might claw back some of its expected losses if it could access US Government funding.

NAB has about $1.7 billion in assets linked to US loans or company debt.

© 2008 Sydney Morning Herald

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