NAB provisions $830m more
(29 July 2008 – Australia) National Australia Bank has announced an additional provision of $830 million due to the downgrade of AAA rated debt.
The $830 million provision is in addition to the $181 million write down issued in the banks half year results earlier in the year.
The provision pushes the provisioned level for the portfolio up to 90 percent.
The credit-rating agencies’ AAA rating on the debt is consistent with a one in 10,000 chance of default and is a higher rating than on any corporate in Australia.
While the portfolio has only seen actual losses of 2 percent of the underlying value of the asset, NAB group chief executive, John Stewart, said that analysis has indicated that the portfolio will continue to deteriorate.
Stewart said that the CDOs were all rated AAA when liquidity facilities were put in place as part of the establishment of NAB’s securitisation business. Given the rating and market data available at the time, the risk was considered extremely small.
Stewart also said that this provision reflects the unprecedented conditions in global credit markets and, in particular, the rapid deterioration in the United States housing market.
The additional provision of A$830 million has been added to NAB’s portfolio of 10 Collateralised Debt Obligations of Asset Backed Securities (ABS CDOs).
These ABS CDOs contain US residential mortgages and are held in international conduit facilities used to finance customers.
The NAB announcement confirmed that the provision would in no way have an impact on the forthcoming final dividend.
The provision pushes the provisioned level for the portfolio up to 90 percent.
The credit-rating agencies’ AAA rating on the debt is consistent with a one in 10,000 chance of default and is a higher rating than on any corporate in Australia.
While the portfolio has only seen actual losses of 2 percent of the underlying value of the asset, NAB group chief executive, John Stewart, said that analysis has indicated that the portfolio will continue to deteriorate.
Stewart said that the CDOs were all rated AAA when liquidity facilities were put in place as part of the establishment of NAB’s securitisation business. Given the rating and market data available at the time, the risk was considered extremely small.
Stewart also said that this provision reflects the unprecedented conditions in global credit markets and, in particular, the rapid deterioration in the United States housing market.
The additional provision of A$830 million has been added to NAB’s portfolio of 10 Collateralised Debt Obligations of Asset Backed Securities (ABS CDOs).
These ABS CDOs contain US residential mortgages and are held in international conduit facilities used to finance customers.
The NAB announcement confirmed that the provision would in no way have an impact on the forthcoming final dividend.
Subscribe