NAB admits further CDO exposure
National Australia Bank further undermined investor sentiment towards financial stocks today when it announced a further $830 million in provisioning for its exposure to collateralised debt obligations (CDOs).
The bank told the Australian Securities Exchange that the amount was additional to the $181 million charge taken in the groups’ half-year results to March 31.
Commenting on the move, NAB chief executive John Stewart said the provision reflected the unprecedented conditions in global credit markets and, in particular, the rapid deterioration in the US housing markets.
He said although current losses on assets underlying the CDOs in NAB’s portfolio related to the provisions averaged around 2 per cent of the current total portfolio, the bank’s detailed analysis and recent default activity indicated the portfolio would continue to deteriorate.
“We believe it is prudent to take a full provision now, based on a worst case scenario,” Stewart said.
AUTHOR
Mike Taylor
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