National Australia stock sinks after A$2b placement

Thursday 23rd July 2009

National Australia Bank stock fell about 5% after that nation’s biggest lender raised A$2 billion selling shares at a discount to strengthen its balance sheet as it prepares to secure funding for the 2010 year.

The shares fell A$1.18 to A$22.40 on the ASX, when they resumed trading after being halted for the sale. The placement was fully underwritten to a minimum A$21.20 and the shares sold to institutions at A$21.50 apiece.The funds raised will increase NAB’s pro forma Tier 1 ratio to about 8.8% as at 30 June from 8.2%. The lender also plans to offer existing shareholders the opportunity to participate in a A$750 million share purchase plan.

NAB faces further calls on its finances. Its Bank of New Zealand unit faces $654 million plus penalties after losing a tax case in the High Court at Wellington. Tier 1 capital, a measure of the lender’s health, was also set to weaken with the A$825 million acquisition of Aviva Plc’s life insurance and advisory units in Australia.

Yesterday the bank said it had achieved its A$19 billion funding target for 2009 and has now started pre-funding the 2010 year. So far this year, the bank has raised more than A$30 billion in term funding.

“The placement was well oversubscribed and will be issued to a wide range of institutional and sophisticated investors,” NAB said in its statement.

Revenue in the three months ended June 30 “was slightly lower than the first half run rate,” and cash earnings for the period were about A$900 million, reflecting “a solid performance under difficult economic conditions,” the bank said yesterday.

The lender will take a charge for bad and doubtful debts of A$1.06 billion for the third quarter. “As expected, asset quality has continued to weaken across all businesses reflecting the economic cycle,” it said.

Businesswire.co.nz

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