Australia Stock Market ,Australia Stock Market news

National Australia Bank (NAB) Thursday unveiled a surprise 11.9 billion US dollar bid for financial services group AXA Asia Pacific’s Australian and New Zealand businesses, trumping a rival offer.

NAB, Australia’s third largest bank, agreed key terms with AXA Asia Pacific (APH), elbowing out the earlier bid by fund-manager AMP. The deal is subject to AXA’s French parent AXA SA taking over its Asian businesses.

“The independent board committee has unanimously concluded that the NAB proposal is in the best interests of AXA APH minority shareholders and superior to the rejected AMP, AXA SA revised proposal, in both its value and terms,” AXA Asia Pacific chairman Rick Allert said.

The announcement came just days after AMP and AXA SA announced a sweetened 12.85 billion Australian dollar (11.68 billion US) offer, intending to carve up the firm’s Australasian and Asian operations.

NAB must now convince the French parent company, which owns 53.9 percent of AXA Asia Pacific, to dump AMP and back the new proposal, according to Dow Jones Newswires.

Either NAB or AMP stand to become Australia and New Zealand’s leading wealth management group, while AXA SA will gain a valuable presence in Asia.

Under the new deal, AXA Asia Pacific shareholders can receive either 6.43 Australian dollars per share or 1.59 dollars and 0.175 NAB shares. AXA closed at 5.65 dollars on Wednesday.

NAB said it will offer new shares worth 1.5 billion Australian dollars to help fund its latest push into the financial services sector, after acquiring Aviva Australia and forming a strategic alliance with JB Were.

“The proposed merger of our wealth business and AXA Australia and New Zealand would combine two successful and highly complementary businesses,” said NAB’s chief executive officer Cameron Clyne.

There was no immediate comment from AMP, which has set its sights on becoming the “fifth pillar” in the Australian financial sector alongside the big four banks.

“I’d like to think that we’ve got a great Australian company buying back the farm,” AMP chief executive Craig Dunn told public radio last month.

Separately, NAB chief Clyne told shareholders in Brisbane that the bank is in talks to offload its UK subsidiaries, Clydesdale and Yorkshire Banks.

He said NAB had been approached by “a number of players in the UK market” over industry consolidation there.

“These approaches indicate that in our Clydesdale and Yorkshire bank we have a high quality asset that is an attractive platform for participation in UK market developments,” he told NAB’s annual meeting in Brisbane.

Australia’s banks are in a strong position after the global financial crisis, during which none needed a government bail-out due to their low levels of risky loans.

Bank fees can be very confusing. With several banking products available in the market, and with different terminologies used to describe the nature of the fees charged on these accounts, it is no wonder consumers often get confused or lose track of the fees they are paying. A simple understanding of when and where you get charged fees can help significantly reduce your fees by minimising the situations giving rise to fees.

Australian banks charged a total of $11.6 billion in fees during 2008. Exception fees accounted for $1.16 billion (10 per cent) of banks’ total fee income. Banks raked in approximately $960 million in penalty fees from households and $200 million from business customers.

Exception fees are typically charged by a financial institution when a consumer makes a late payment, overdraws an account or exceeds a credit limit. Most of these fees are pure profit for the banks. Analysis conducted by Deutsche Bank has revealed that 87 cents in every dollar a big bank takes from a customer in penalty fees is pure profit.

Bank fees can be very confusing. With several banking products available in the market, and with different terminologies used to describe the nature of the fees charged on these accounts, it is no wonder consumers often get confused or lose track of the fees they are paying. A simple understanding of when and where you get charged fees can help significantly reduce your fees by minimising the situations giving rise to fees.

Australian banks charged a total of $11.6 billion in fees during 2008. Exception fees accounted for $1.16 billion (10 per cent) of banks’ total fee income. Banks raked in approximately $960 million in penalty fees from households and $200 million from business customers.

Exception fees are typically charged by a financial institution when a consumer makes a late payment, overdraws an account or exceeds a credit limit. Most of these fees are pure profit for the banks. Analysis conducted by Deutsche Bank has revealed that 87 cents in every dollar a big bank takes from a customer in penalty fees is pure profit.

Key changes for exception fees:

ANZ

Currently customers are charged a flat rate of $35 for all honour, dishonour and periodical payment non-payment fees. Overdrawn, over-limit and late payment fees are also charged at $35. However ANZ Access Basic account customers (students and concession card holders) are charged $10 for these Exception Fees.

Commonwealth Bank

• Dishonour Fees will reduce from $35 to $5 on all personal and business transaction accounts. 

   

• Overdrawn Approval Fees will reduce from $30 to $10 on all personal and business transaction accounts 

   

• Late Payment Fees will reduce from $45 to $25 on all home, investment and personal loans

NAB

• Account Overdrawn Fees will be abolished from $30 to $0 on personal transaction and savings accounts

Westpac

• Account Overdrawn Fees will reduce from $40 to $9 on all personal and business accounts 

   

• Outward Dishonour Fees will reduce from $35/$50 to $9 on all personal and business accounts 

   

• Periodical Payment Not Made Fees will reduce from $35/$50 to $9 on all personal and business accounts 

   

• Missed Payment Fees will reduce from $35 to $9 on all credit cards and personal loans 

   

• Over-Limit Fees will reduce from $35 to $9 on all credit cards and personal loans

The banks are bouncing back! We plot NAB (black bars) and CBA (blue bars) on a daily chart. Of course over the long-term those two stocks are highly correlated, but on short-term basis there are discrepancies that may make them more or less attractive for trading purpose.

First, the recent lows posted on January 23 at $24.03 for CBA (point A) and at $16.68 for NAB (point C) do not have the same significance on their own historical price action. For CBA, it was the lowest since 2003 whether for NAB it was a low that had not been posted since 1997.

Click to enlarge

However between their historical highs of November 2007 and those recent lows, CBA lost 61% of its value. NAB lost 63%. The spread between the two charts remains almost the same over the time: it means that both of them rise and decline at a very similar pace.

With a technical approach, what are therefore the clues to choose one of these stocks rather the other one for trading purpose? For instance, have a look at the price action since the beginning of the year. During the month of February, it has been a bullish period for CBA that jumped from $26.45 to $29.80. During the same period, NAB fell a bit further down from $19 to $17.88. As a result, CBA has already bounced back significantly as the price action posted an obvious higher low (point B), which is typically a pattern that signals here a trend reversal and a new positive development. It is confirmed by the higher highs also posted in 2009 (points D and E).

Conversely, the price action of NAB posted a lower low (point D), which is typically a pattern that signals a continuation of the bearish trend. This is confirmed by the lower highs also posted in 2009.

Both of them have now been rebounding for a whole week. In this scenario, for trading purpose, we would suggest that NAB has the better rebound potential as it has been a bit more oversold than CBA. For investing purpose, probably that CBA would be more attractive as the long-term configuration looks stronger.

Can we expect anything like this here? To some degree we’ve already seen it with Allco [ASX:AFG], Babcock & Brown [ASX:BNB], Opes Prime, Tricom and MFS [ASX:OCV]. But they mainly peripheral players. Merrill Lynch, Lehman Brothers and Bear Stearns were not on the periphery in US markets.

The next phase is to see if any of our major banks get caught in the wash-up. Could an Australian bank or major brokerage firm fall to the same fate? ANZ Bank [ASX:ANZ] and National Australia Bank [ASX:NAB] have been touted as the riskiest of the four major banks. As for the broking firms, only those with proprietary trading desks, deal heavily in debt securities or who have unsustainable loan books, are candidates for trouble.

We have said it for a while now. We are content to stay away from the finance sector. We may miss out on some of the upside when the market turns, but we are prepared to take that chance.

This morning The Australian newspaper tells us that “NAB, ANZ most at risk, investment bank Citi warns,” – it probably isn’t the best constructed headline the world has ever seen, but it does get the message across… just.

We have to admit that we do always find it entertaining when one bank is passing judgement on another. It almost seems as though they are reluctantly breaking some secret covenant if they criticize the competition. Although their biggest fear is highlighting something in another bank which others may think is also the case in their bank.

For a start it seems odd that none of the banking analysts were able to pick up potential problems in the credit markets, despite these analysts having an in-depth knowledge of how these complex products work.

44 Pages You DON’T Want to Read
Despite this warning by Citi, the bank has still decided that both NAB and ANZ make a worthwhile investment and have upgraded both companies to Hold. After glancing at the 44 pages of charts, tables, ratios and acronyms we will just have to take their word for it! We try to be briefer with our research at the Australian Small Cap Investigator.

But perhaps this is the very reason the analysts missed all the warnings that were soon due to explode onto credit markets. They just couldn’t see the woods for the trees.

And maybe, just maybe they didn’t understand how complex products such as Collateralised Debt Obligations (CDOs) worked. They can’t take all the blame though, as they were ably assisted by credit ratings agencies (Standard & Poor’s, Moody’s, Fitch) who allowed their ratings to be manipulated and distorted to such an extent that the genuine meaning of a AAA credit rating went out of the window.

All You Need to Know About CDOs
How so? We don’t have the space to go into it in any great detail, so here’s the thirty second version. A Triple A credit rating is normally reserved for those companies or governments that are deemed by the rating agency to be so financially reliable – beyond almost any doubt – that they will have no problem in repaying their debts. For example the Australian government has a AAA credit rating.

The less the expectation is that a company or government can repay its debt the lower the credit rating, eg. AA, B, B-, C, etc… Bonds with a rating of less than B are typically termed as being “Junk Bonds.”

Needless to say, the greater the credit quality, the lower the interest rate as there is perceived to be lower risk. The lower the credit quality the higher the interest rate in order to compensate for the higher risk.

The problems with CDOs is that the investment banks would take a bunch of mortgages for example and split them into tranches. The tranches may be exactly the same ‘quality’ however, they had a different order of priority that would effectively subject the first tranche to any defaults first up to a certain level. Once that level was breached then the second tranche would be subjected to any defaults, and so on until finally the last tranche would start to be allocated any defaults.

When is Triple A Not Triple A?
You’ve guessed it, this last tranche was deemed to be Triple A rated debt by the ratings agencies. To investors it was placed on the same risk level as major corporations and governments despite the fact that it was just a big pool of home mortgages.

Did the likes of NAB and ANZ know this? You would have thought so, but based on the ANZ report into its securities lending business where it claimed that staff didn’t know what they were doing, then perhaps it didn’t.

The market is up 24, below futures expectations - SFE Futures were up 72 this morning. Financials strong – up 1.9% after strong rise in US financials on Friday. Resources down 2.1% following falls in BHP and RIO in the US. The property sector is up 1.7%. Results season going OK– United Group up 4.5% on results. Crane Group up 3.2% on results, Bendigo & Adelaide Bank up 3.16% on results. Profits warning –Babcock & Brown have issued a profits warning this morning and fallen 9.41%.

Dow up 302. Up 329 at best. Down 43 at worst. Main factors behind the rise in the Dow on Friday include falling oil prices and a rapidly appreciating USD (A$ down to $88.85). Dow up 3.6% for the week – S&P up 2.9% and the Nasdaq up 4.5%. Oil down 4% on Friday - down 8% for the week – still up 20% year-to-date. Energy sector fell 0.6% on falling oil and rising USD. Resources and metal prices sold off as USD rose (makes commodities more expensive and reduces demand). Euro weak on European Economic growth concerns. Financials up 3.5% although Fannie Mae posted a wider-than-expected 2Q loss – down 9%. Homebuilders and retailers well up – 7% and 4.3%. 2Q unit labour costs were up just 1.3% - easing inflation concerns and boosting bonds.

• Both BHP and RIO down in ADR form on Friday, 1.83% and 3% respectively. BHP down 49c to 3666c. RIO down 333c to 11265c.
• Metals all down on Friday – Nickel down 3.59%, Zinc down 3.46% and Copper 3.67%. Aluminium down 2.41%. Oz Minerals down 3% or 6c to 178c.
• Oil price down $4.42 to $115.42 despite concerns of a sabotaged oil pipeline in Turkey. Woodside down 7c to 5143c.
• Gold down $13.10 to $860.70. Newcrest down 178c to 2461c.
• US Bonds down with the 10 year yield up to 3.95% from 3.93%.

RBA impending rate cuts, falling oil prices and weaker AUD lifting consumer and industrial sectors– up about 2% each – DJS up 5.0%, ANN up 4.4%, WOW up 2.1%, HVN up 3.9%. Healthcare flying– CSL up 4.7% ahead of results this week, SHL up 5.1% and COH up 2.9%. Big industrials benefiting from lower oil price – exporters benefiting from lower AUD – WES up 2.0%, BXB up 2.1%, QAN up 2.4%. TOL up 2.4%. Nickel stocks falling over on a fall in the nickel price – WSA down 1.3%, MRE down 9.1%, PAN down 7.1%, and MCR down 5.6%.

RBA’s Statement on Monetary Policy is out– Main message: Inflation in Australia still high - in other words the same message as last week’s statement….interest rates have peaked and cuts are on the way.

NAB comment on the oil price – “markets are in for one of the most amazing turnarounds ever seen…entire commodity boom looks like busting… this is just the start of a pullback. It is very feasible to get downside targets into the $70-$65 zone”.

• Bendigo and Adelaide Bank(BEN) up 5.1% on results roughly in-line with consensus.
• United Group (UGL) up 4.3% on full year profit. Described as a strong underlying result. 
• Crane Group (CRG) up 3.8% on solid result - net profit in line with expectations and guidance.
• Babcock and Brown (BNB) down 7.8% early on profit warning – says interim net profit to be down 25-40% below that of $250m 2007 interim result.
• Felix Resources (FLX) down 7.36% after putting construction on hold at its key Moolarben thermal coal project while awaiting NSW court of appeal who Friday upheld Xstrata’s case about the validity of the two mining leases.
• Macquarie Airports (MAP) down 6% as Sydney Airport approach banks to refinance $762m of debt, probably at much higher rates than current levels.
• Credit Suisse tip Cochlear (COH) to post FY08 net profit tomorrow in middle of analyst’s consensus range – up 2.63%.
• JP Morgan predicting Bluescope Steel (BSL) to post FY08 normalised earnings up 22% on FY07 and 4% above consensus and BSL’s guidance. Despite that the price is down 5.13%.
• AGL Energy (AGK) up 2.07% as UBS cut AGK’s target to 1590 from 1640 due to the fall in Queensland Gas price in which it has a 28% stake.
• UBS have cut their target price on nickel stock Minara (MRE) by 50% from 370c to 185c and their recommendation to NEUTRAL from BUY – down 7.3%.

We await CBA results on Wednesday– a bellwether for the bank sector. Hard to believe they won’t be good….otherwise why haven’t they let us know in the wake of the NAB and ANZ profit warnings. Telstra results also on Wednesday. Guidance of 6-8% growth…consensus is 9.5% growth.

The market is up 132. Financials rocketing – up 4.2% after the strong lead from the US. The main theme has changed in the last 24 hours from inflation fears and pressure on interest rates to lower inflation and interest rate cuts. It is a very important change in market thinking and at the risk of crying “Wolf” is a significant foundation for a market rally from here….whereas other rallies have been little more than a thrashing herd changing direction. 

RBA set to cut rates in September with a 68% chance of a 50bp point cut factored into Futures markets. Property flying – up 3.8%. Building stocks strong.  SFE Futures were up 88 this morning. Resources also up 2.0% but getting left behind.

Dow up 331. Up 332 at best. Gradually rose all session and closed on high. Dow up the most in four months. All 10 sectors up. 7 sectors up more than 2%. 91% of S&P500 components up. FOMC leave the Fed funds rate unchanged at 2.00%.Key point: Oil fell to a 3-month low and resources fell - the talk on CNBC this morning is that the Fed expect commodity prices to fall allowing them to ease up on the prospect of interest rate rises. Some signs of growth - July’s ISM non-manufacturing index up more than expected. Crude down another 2.4%helped oil-sensitive stocks. Consumer discretionary sector up 4.4% (steepest advance in 5-years), Retailers up 5.3%, Airlines up 9.4% and Transportation up 4.9%. Commodities CRB Index lost 10% in July – steepest decline in 29-years as oil, copper and wheat prices plummeted. Energy underperformed on falling oil prices – only up 1.1%. Financials up a whopping 5.1% - helped by a rise in European banks after Paris’s Societe Generale posted better-than-expected earnings. AIG led the jump – up 12% on an upgrade to BUY at UBS. Mortgage related stocks jumped – MBIA up 8.79%, AMBAC 12.89%, the 2F’s (Fannie and Freddie) up 14.96% and 6.91%.

• Both BHP and RIO down in ADR form overnight, 2.09% and 2.42% respectively. BHP up 93c to 3675c. RIO up 311c to 11390c.
• Metals mixed overnight – Copper up 0.44% and Aluminium up 0.64%. Zinc down 1.31% and Nickel down 2.31%. Oz Minerals up 6.1% or 10c to 173c.
• Oil price down $2.74 to $118.71 on belief that a slower US economy will reduce demand. WPL up 69c to 5189c.
• Gold down $21.70 to $881.80. NCM down 71c to 2560c.
• Bonds down with the 10 year yield up to 4.02% from 3.97%.

Gold stocks getting belted again today - as a hedge against inflation Gold will struggle with the lower inflation theme.

Stocks that struggle with a higher A$ doing well today on hopes that interest rates and the A%$ have peaked. Talk of the A$ going under 90c.
 

Australian Housing Finance slumps 3.7% in June- more than the 2.0% expected – investor housing finance also down 0.3%. Weak numbers will support the RBA’s bias towards cutting rates.

Most Oil stocks up despite an overnight fall in the oil price.

Asciano (AIO) up 6c to 501c on results and comments that they have had approaches for their assets. The company rejected a private equity bid on Monday at 440c.

News Corp’s (NWS) up 4Q results see a 27% jump in net income. Said their pace of growth will ease and that more challenging economic conditions are ahead. Well received in the Us and here and benefiting from the fall in the A$. NWS up 3.84% or 62c to 1672c.

Corporate Express (CXP) half year results not flash and contains net profit guidance of $61.7m-$66.1m. CXP negotiating with possible acquisition targets. Weres think result disappointing and they are reviewing forecasts. CXP flat at 560c.

ResMed (RMD) announced 4Q net profit grew by 7% and FY08 earnings up 66%. CEO says well positioned to deliver strong growth in FY09. RMD up 13.65% or 55c to 458.

NAB announced the first phase of its Next Generation Platform initiative to replace core banking systems over the next 5-years. Up 90c to 2565c.

Beach Petroleum (BPT) announced substantial coal seam gas reserves upgrade – 282% jump in probable reserves at Surat Basin. BPT up 4c or 3.85% to 108c.

Newcrest Mining (NCM) says partial gas from Varanus island now flowing to Telfer mine – 50% of gas to Telfer under contract with Apache will now be possible. NCM down 2.7% or 71c to 2560c.

Tower Australia (TWR) said St George Bank’s switch to AIG Life as favoured new life insurance partner will impact around $60m on TWR’s $700m in-force book. No impact on FY08 with slight profit impact in FY09. TWR up 4.62% or 7.5c to 170c.

Tabcorp (TAH) tipped by Weres to spend $400m in capex for its Star City casino. TAH expected to write down the value of its Victorian gambling license in FY results tomorrow. Analysts consensus for net profit before one-offs is $515m, up 14% on last year. TAH up 21c to 877c.

PanAust (PNA) confirms high-grade Copper-Gold at Puthep, Thailand – project study at feasibility stage and to be completed 1H09. PNA up 1.5c to 70.5c.

Seven’s (SEV) FY year results yesterday sees brokers holding or cutting target prices this morning – acquisitions seen as the key to unlocking value - buyback to support share price. SEV up 11c to 850c.

PaperlinX (PPX) being tipped by JP Morgan to report FY08 net profit of $50m, 32% down on FY07 on August 21^st. PPX up 12.44% or 25c to 226c.

WA News (WAN) tipped by JP Morgan to post FY profit of $126m later today. WAN up 2.57% or 23c to 919c.

 Problem with Bank

Boom. The second of the four pillars went down yesterday.

When the dust settled at the end of trade, 11% of ANZ’s (ASX:ANZ) share price was missing. Its weakness was the same one that crushed 15% of National Australia Bank on Friday. The falling and uncertain value of CDOs.

Collateralised Debt Obligations are pot-luck assets. Investment banks basically take a bunch of different ingredients – high-risk mortgages and low-risk mortgages, for example – and stir them together into one product. Then they sell these off to whoever wants them.

The CDO units with mortgage assets encased inside them are crumbling. Any businesses built with CDO bricks are crumbling now too. But because they’re a mish-mosh of assets, no-one really knows how much their CDOs are worth.

So far, we know that other Aussie banks have CDOs built into them somewhere too. You’d probably like to know how many CDO bricks there are. The banks are keeping their mouths shut on that one.

Westpac (ASX:WBC) has said it hasn’t suffered any losses on its CDO portfolio. It owns a “small, high quality CDO portfolio”. Commonwealth has said it has no unhedged CDOs or CLOs (Collateralised Loan Obligations), but a “small portfolio” that is “fully hedged”.

Seeing as none of the banks plan to divulge exactly how much CDO or CLO exposure they have…the nearest thing the market has to go on is total derivative exposure. So here it is. These are the figures from the banks most recent balance sheets. Most of them reported in March.

NAB and ANZ have probably built the most bricks into their businesses. St George probably has the least. But all the banks have fallen in double figures since Thursday’s close, before the funeral procession began.

Ordinarily, we might look at this as a trade. Commonwealth, for example, has about half the derivative exposure as ANZ. Plus it has hedged those assets. But it’s still down 11%.

The problem with this CDO mess is that analysts and financiers are having trouble valuing the assets. Plus they can, and probably will, fall further. NAB boss John Stewart noted on Friday that America has about as many spare homes as Australia has people.

If there’s still more bad news to come, we don’t see any compelling reason to look at the banks yet. The market seems to agree. The big banks are down another 2-5% again today.

Wall Street Sends All Ords Lower

But that probably has a lot to do with Wall Street’s performance last night. The Dow Jones fell 2% after regulators closed two small regional banks. The smallest ones are the first to go.

Expect more of this. It may seem like financials will never heal. They will eventually. We don’t know what the industry will look like then. Probably a lot more conservative…until the next big fad loads up balance sheets with debt until it all climaxes in another bubble.

Meanwhile, iron ore and coal stocks are still in high demand…

The ANZ bank this morning warned the market its looking at a 25% drop in earnings because of dodgy and bad loans. In a statement to the ASX the bank joined its Melbourne rival, the National Australia Bank, in softening up shareholders for the worst. The ANZ said 2008 cash earnings per share were likely to fall between 20% and 25% on the previous year due to a rise in credit impairment costs. ANZ said its provisions in the second half were likely to be around $1.2 billion as a result of the ongoing deterioration in global credit markets. It made provisions of $980 million in the first half. The ANZ forecast that 2008 annual profit before provisions to rise by around 8% and its annual cash profit would exceed $3 billion for the year to September 30. The second half collective provision charge is expected to be $375 million, from $376 million in the first half while for individual provisions, ANZ said known credit issues had deteriorated including ”certain commercial property clients, securities lending and Bill Express”. Second half individual provisions are expected to be around $850 million, from $604 million in the first half. ”ANZ’s underlying business is continuing to deliver a solid performance, and we expect a cash profit of over $3 billion in 2008,” chief executive Mike Smith said in the statement to the ASX. The news comes after credit rating agency, Standard & Poor’s revised its credit watch outlook for the National Australia Bank and its subsidiaries after the bank’s shock revelation on Friday that it had put aside an extra $830 million to cover provisional losses on dodgy housing loans in the US. S&P said it was changing the NAB’s outlook to negative from stable. The decision caused the market to drop 3% on Friday and the NAB almost 14% in the biggest drop in almost 21 years. Investors on Friday cut $7 billion from NAB’s market value. The $830 million provision adds to another charge booked earlier this year and takes the bank’s total exposure to $1.01 billion, meaning some 90% of the value of the CDOs has now been written down. The ratings agency said the additional provision was a significant amount, representing 40% of NAB’s pre-tax earnings for the first half of fiscal 2008. However, it has affirmed its current credit rating (AA/A-1+). Standard & Poor’s said the banks ratings were likely to be lowered if NAB were to suffer a further significant increase in credit costs, if some other significant unfavourable information was to emerge, or if NAB experienced adverse investor sentiment. “Although we expect the bank to remain profitable in the second half of fiscal 2008 and that the large provision is a one-off event, the negative outlook reflects the risk of further increases in credit costs in the next 12 months,” Standard & Poor’s credit analyst Sharad Jain said. “Apart from emphasising the potential for higher credit costs, today’s announcement highlights that NAB may face challenges in predicting future credit losses.

“Furthermore, such developments could reduce investor confidence, which would put pressure on the bank’s funding access and costs.”

Standard & Poor’s said it expected NAB would continue to “rigorously monitor and manage its credit exposures, funding, and liquidity amid the challenging conditions in the financial markets, and maintain its conservative capital profile”.

The NAB’s CEO, John Stewart said on ABC TV yesterday that “This is the bottom for us for housing in the US because we are now cleared out”.

Mr Stewart said NAB’s other business continued to do well and the company’s dividend would therefore be unaffected by the $830 million provision.

The bank late Friday revealed a further $4.5 billion in CDOs written on a mixture of corporate loans, infrastructure and commercial property assets in Australia, Europe and the US.

Mr Stewart said the situation for the US housing market would probably worsen.

“Things are going to get worse,” he said.

“There are more than 18 million vacant properties for sale in the United States just now. That’s more than the whole housing stock of Australia.”

He said it was a worrying time for the US economy and it would be some time before it recovered.

Mr Stewart said the National would not have to raise new equity to account for the provision.

“No, we don’t,” he said.

“That’s why we were so confident that we should take a big write-off here and not let it drip over the next few years,” he said.

It’s the biggest crisis for the bank since the foreign exchange options trading losses four years ago and it wouldn’t surprise if the key regulator, APRA, became involved.

Shares in NAB, the nation’s second largest bank, ended down $4.14 or 13.49% on Friday at $26.56.

The ASX200 index finished down 173.6 points, or 3.37%, to 4970.5 after hitting a low of 4939.8 in intra-day trade, while the All Ordinaries shed 157.4 points, or 3.03%, to 5031 after reaching a low of 5003.2 in early trade.

It was the biggest one-day fall since January 22, when the All Ords fell 7.3% and the S&P ASX 200 fell 7.1%. The futures had the local market opening up 24 points today after trading overnight Friday.

The Commonwealth Bank fell $3.14, or 6.77%, to $43.25, the ANZ shed $1.70, or 8.74%, to $17.75 and Westpac fell 71c, or 3.11%, to $22.09. St George Bank lost $1.04, or 3.51%, to $28.61.

Analysts said the NAB would suffer a $600 million blow to its annual net profit for the year to September 30 after the write-down.

The NAB also faces pressure on earnings from sluggish economies and lending in New Zealand and in Britain.