Market Mauling For Nab Shares
The Age
Tuesday September 4, 2001
A record $6.7 billion was yesterday stripped from the market value of Australia's largest bank, the National Australia, after it shocked investors with a $3.3 billion writedown of its United States mortgage business.
NAB stunned the market with the $US1.75 billion charge, coming only two months after it wrote $450 million off the same subsidiary, HomeSide Mortgage Lending.
The $4.30 fall in its share price in one day - down from $33.20 to $28.90 - is the equivalent of a company the size of CSR evaporating overnight.
NAB chief executive Frank Cicutto admitted the HomeSide charge was ``a disaster for the organisation", but rebuffed any suggestion he might resign over it.
NAB's new chairman, Charles Allen, on his first day in the job - his predecessor Mark Rayner quit because of his involvement in the decline of lead and zinc miner Pasminco - said Mr Cicutto had the board's full support.
The bank discovered the problems with HomeSide only because consultants were reviewing the business in preparation for an expected sale.
HomeSide, which specialises in packaging mortgages for the United States market, has been hard hit by the cuts in interest rates that have prompted increasingly large numbers of customers to refinance their mortgages, taking away business.
The discovery of a flaw in systems valuing HomeSide did not emerge until Saturday - forcing NAB to convene an emergency board meeting on Sunday.
Mr Cicutto said yesterday that while the charges were large, they would not prevent NAB from increasing its profit by about 10 per cent to an expected $3.89 billion when its financial year ends on September 30. Dividends to shareholders are also expected to maintained.
BUSINESS 1: National Australia boss under the gun
© 2001 The Age