NAB faces $450m shareholder lawsuit
Already under pressure from Canberra and customers over interest rates, National Australia Bank is facing a class action from shareholders seeking $450 million in losses caused by a share plunge in 2008.
Approximately 250 institutional and retail investors are part of the legal proceedings, which started today with the filing of a class action in the Victorian Supreme Court.
The action centres on a dramatic fall in NAB’s share price late in July 2008 after the bank took an $830 million charge on a portfolio of complex collateralised debt obligations (CDOs) partly linked to risky US sub-prime mortgages.
That move followed a $181 million charge on the same portfolio two months earlier.
Law firm Maurice Blackburn is representing the shareholders. It claims NAB failed to properly disclose the extent of its exposure to the toxic US sub-prime mortgage market.
NAB should have been well aware of the risks associated with its CDOs, Maurice Blackburn principal Andrew Watson said.
‘‘Our case is that all of the indicators showing the deterioration in the US sub-prime housing market were available to NAB - it’s a bank after all - starting as early in some cases as 2006, going through 2007,’’ he told journalists.
‘‘And so Maurice Blackburn says that by 1 January 2008 it was evident to anyone following these sorts of collateralised debt obligations that there was a serious exposure and a serious risk of losses.‘‘NAB should have revealed the extent of that exposure on 1 Jan 2008. It didn’t.’’
NAB shares lost 13.5 per cent of their value on the day it revealed the $830 million charge, and continued to fall in subsequent trading days.
Shareholder George Vlachos is a lead participant in the class action, and says his private investment business lost somewhere between $3000 and $7000 as a result of the July 2008 share plunge.
‘‘When companies disclose information it needs to be accurate,’’ he said. ‘‘Investors rely on this to make informed decisions.‘‘When that is not the case it undermines investor confidence.’’
Given the drawn-out nature of similar cases, settlement is the most likely outcome of the proceedings, but Mr Watson said NAB was yet to indicate such a move.‘‘I’m not expecting NAB to come knocking on my door any time soon,’’ he said.
NAB said it received notification of a possible class action by Maurice Blackburn in April 2009, but has not received details of the claim.
‘‘We have also advised shareholders that any claim, if initiated, will be vigorously defended,’’ the bank said in a statement.