NAB class action settlement sends message
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MELBOURNE, Nov 9 AAP
November 09 2012, 2:47PM
The settlement of a class action against the National Australia Bank relating to the bank's heavy losses over toxic subprime home loans in the United States sends an important message to corporations, says the law firm that led the case against the NAB.
NAB said on Friday that it would pay $85 million to settle the action taken against it by about 15,000 shareholders, pending court approval.
Law firm Maurice Blackburn said the settlement amount was $115 million, inclusive of interest and costs.
Maurice Blackburn principal Jacob Varghese said it was a very significant settlement.
"It's the biggest company in Australian history to pay a class action settlement of this size: over $100 million," he told reporters on Friday.
"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 were seeking damages after a sharp fall in the bank's share price in July, 2008.
In 2006, NAB had bought $A1.2 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 $181 million provision for the CDO exposure in May 2008, then increased it to $1.1 billion two months later, sending the company's share price plunging by nearly $6.00.
The NAB shareholders taking action against the bank claimed that NAB knew, or should have known, that it would suffer material losses on its CDO portfolio by at least as early as January 1, 2008.
They also claimed that NAB should have shared the information with shareholders.
NAB said on Friday that the settlement did not indicate an admission of liability by the bank and that the settlement was purely a commercial decision.