NAB to pay $147m over class action

By Trevor Chappell

Big corporations should take note of a A$115 million settlement of a class action against the National Australia Bank, law firm Maurice Blackburn says.

About 15,000 NAB shareholders took legal action against NAB after it sustained heavy losses related to toxic subprime home loans in the United States.

NAB said it would pay $85 million to settle the case, pending court approval.

Law firm Maurice Blackburn, which led the case against NAB, said the total amount payable was A$115 million, ($147 million), including interest and costs.

"It's the biggest company in Australian history to pay a class action settlement of this size: over $100 million," Maurice Blackburn principal Jacob Varghese said.

"In that sense, we think it sends a message to all Australian companies, no matter how big they are, that they do have an obligation to keep their shareholders informed of important material information, and that shareholders are willing and able to seek compensation where something goes wrong."

NAB shareholders sought damages after a sharp fall in the bank's share price in July 2008.

In 2006, NAB had bought A$1.2 billion of collateralised debt obligations (CDOs) that were heavily exposed to the US subprime residential mortgage market, which became toxic debt in 2007 and early 2008, according to Maurice Blackburn.

NAB first made a A$181 million provision for the CDO exposure in May 2008, then increased it to A$1.1 billion two months later, sending the company's share price plunging by nearly A$6.00.

The NAB shareholders claimed the bank knew, or should have known, it would suffer material losses on its CDO portfolio by at least as early as January 1, 2008.

They also claimed NAB should have shared the information with shareholders.

NAB said the settlement did not indicate an admission of liability by the bank.

- AAP

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