National Australia Bank Sells Equity Stakes Amid Rogue Trading Losses

Strategic Insights -

National Australia Bank Ltd., the largest lender in Australia, has sold equity stakes in St. George Bank Ltd., insurer AMP Ltd., and its British unit HHG plc, in a move that could clear the way for potential buyers Citigroup Inc. and HSBC plc to acquire AMP's Australian business. The bank reported a A$360 million loss on unauthorized trading of currency options, nearly double the estimate, and suspended four traders. The sales, worth nearly A$1 billion, mark the end of National's ambitions to take over St. George Bank and AMP.

Key Takeaways:

  • National Australia Bank Ltd. has sold its equity stakes in St. George Bank Ltd., insurer AMP Ltd., and HHG plc in deals worth nearly A$1 billion.
  • The sales were made to facilitate the acquisition of AMP's Australian business by potential buyers Citigroup Inc. and HSBC plc.
  • National reported a A$360 million loss on unauthorized trading of currency options, nearly double the estimate, and suspended four traders.
  • The bank sold its 2.2% stake in AMP at A$4.50 per share, raising A$190 million, and its 2% stake in HHG plc at A$1.05 per share, netting A$37 million.
  • The sale price of St. George Bank shares has been set at A$19 apiece, potentially netting National at least A$750 million.
  • The deals mark the end of National's ambitions to take over St. George Bank and AMP, which it built its stake in over several years.
  • The bank's chief executive, Frank Cicutto, stated that the sales were decided on late last year and not linked to the currency trading reverses.

Statistics:

  • National Australia Bank Ltd.'s loss on unauthorized trading of currency options: A$360 million
  • Estimated value of National's stake in St. George Bank Ltd.: A$750 million (based on sale price of A$19 apiece)
  • Total value of equity stakes sold: nearly A$1 billion
  • Number of traders suspended: four
  • Size of AMP's Australian business: A$66 billion in assets managed
  • Number of years National built its stake in AMP: several
  • Sale price of AMP's shares: A$4.50 per share (2.2% stake)

Sources:

  • "Nab sells stakes in AMP, St. George," The Deal, January 28, 2004
  • "National Sells Stake in AMP for A$206 Million," The New York Times, August 15, 2003
  • "AMP Spins Off Henderson Global Investors Unit," Bloomberg, August 1, 2003