NAB has reached an agreement that will see it make a multimillion dollar payout to disgruntled investors.
The settlement revolves around a class action brought against the bank by a group of shareholders who acquired NAB shares between January and July 2008.
According to Maurice Blackburn lawyers, who are representing the group making the class action, the plaintiffs have claimed that NAB knew, or should have known, that it would suffer material losses on its collateralised debt obligation (CDO) portfolio by at least as early as 1 January 2008. They also claimed that NAB should have shared that information with shareholders.
Claiming that CDOs “were the one of the exotic financial products that lay at the heart of the financial crisis of 2007 and 2008”, a Maurice Blackburn statement said the following about the NAB class action:
“On 25 July 2008, National Australia Bank Limited (NAB) announced that it was taking a total provision of over $1bn to its portfolio of 10 'collateralised debt obligations' or CDOs. On that day, the price of NAB shares fell 13.5%.
“This announcement came less than two months after NAB told investors that it was provisioning only $181m against the same portfolio. At that time, 9 May 2008, NAB told investors that the $181m provision was the result of 'a forensic deep dive' into the portfolio and represented ‘a strong provisioning position that protects our balance sheet against whatever may come out of these in a credit sense in the future’.
“The class action is brought on behalf of all people and companies that bought NAB ordinary fully paid shares in the period between 1 January 2008 and 24 July 2008 and suffered a loss as a result of NAB's alleged contraventions. You may have suffered a loss if you acquired shares in that period and continued to hold them on 25 July 2008.
“On 24 August 2012, the Supreme Court of Victoria made orders requiring group members to register their claim or opt out of the group proceedings by 12 October 2012.”
Proceedings commenced in November 2010 against NAB in the Supreme Court of Victoria. The settlement involves a payment of $85m plus an allowance in respect of interest and costs in full and final settlement of the class action, of which $50m is comprised of available insurance proceeds with the remainder substantially covered by existing provisions.
A NAB statement noted that the settlement will have an immediate impact on FY13 earnings, that it has been reached on a commercial basis and that there is no admission of liability by NAB.
Commenting on the settlement, NAB company secretary Michaela Healey stated that NAB had always said that it would vigorously defend the class action, and remains confident about its legal position in the proceedings.
“The settlement of the class action is a purely commercial decision made in the interests of our shareholders. We are pleased to put this matter behind us so that we can continue to focus on improving returns for our shareholders without the distraction and significant expense of a lengthy trial,” she said.