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Banking industry

National Australia Bank Faces Threats to Its Status and Share Price

Strategic Insights

— 2 min read

National Australia Bank is facing an uncertain future as its profit and board woes threaten to damage its share price and potentially even strip it of its status as Australia's biggest bank. The bank's market capitalization has dropped to $44.7 billion, with a share price fall of over 4% in recent days, leaving it barely $5 billion above Commonwealth Bank of Australia. The bank's board is under pressure following the dispute with dissident director Catherine Walter, who has leveled allegations against the bank's investigations into the $360 million foreign-exchange trading scandal.

Key Takeaways:

  • National Australia Bank's market capitalization has dropped to $44.7 billion, with a share price fall of over 4% in recent days.
  • The bank's board is under pressure following the dispute with dissident director Catherine Walter, who has leveled allegations against the bank's investigations into the $360 million foreign-exchange trading scandal.
  • The bank is expected to report an 8 to 10% lower first-half profit before significant items, pointing to bigger problems than those highlighted by the forex scandal.
  • The bank is planning to raise $1.2 billion via a capital raising to support its dividend payout and meet stricter capital requirements imposed by the Australian Prudential Regulation Authority.
  • The bank's new chairman, Graham Kraehe, has resigned from the News board to concentrate on NAB and his BlueScope Steel chairmanship, which may suggest he does not intend to bow to pressure to resign.
  • Dissident director Catherine Walter has accused the bank's board of failing to provide adequate information about the independence of investigations into the forex scandal.
  • Wilson HTM's Brett Le Mesurier described the bank's situation as "death by a thousand cuts."
  • Investor 452 Capital's director Peter Morgan said investors had to be aware that NAB was disguising an ordinary capital raising in the form of a dividend.

Statistics:

  • The bank's market capitalization is $44.7 billion.
  • The share price has fallen over 4% in recent days.
  • Commonwealth Bank of Australia's market capitalization is barely $5 billion below NAB's.
  • The bank's board is due to issue a notice of meeting for a spill of board positions.
  • The first-half profit is expected to be 8 to 10% lower before significant items.
  • The bank will raise $1.2 billion via a capital raising.
  • The bank's dividend reinvestment plan will be underwritten by an investment bank.
  • The bank's profits are expected to be affected by adverse currency movements, falling margins, increased regulatory costs, and bad debts in its corporate banking operations.

Sources:

  • "National Australia Bank faces board and profit woes" by Anthony Hughes, The Australian.
  • Bloomberg.
  • Wilson HTM's Brett Le Mesurier.
  • 452 Capital's director Peter Morgan.
  • News Corporation.

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