Nab Has Its Sights On Broker

The Age

Saturday July 12, 2008

Colin Kruger, With AAP

NATIONAL Australia Bank wants to buy the local broking arm of ABN Amro, despite warning of more losses from the global credit crunch.

The news sent NAB shares plunging as much as 4% yesterday, before they recovered to close just 16 lower at $27.45.

It came on the day Commonwealth Bank, the nation's largest home lender, and ANZ increased their standard variable home loan rates to counter the rising cost of funds because of global credit market turmoil.

CBA increased its rate by 14 basis points to 9.58%. ANZ went up 15 basis points to 9.62%. Both increases apply from Monday. A week ago, St George Bank increased its standard variable rate by 20 basis points to 9.67%.

Meanwhile, NAB said it was in talks to acquire ABN Amro's investment banking and wholesale banking divisions in Australia and New Zealand. "Any potential transaction would be subject to due diligence and, ultimately, receipt of all relevant regulatory approvals," it said.

ABN Amro says it is Australia's largest full-service retail stockbroking and wealth management organisation, with more than 300,000 clients and 763 staff in 52 offices nationwide.

Research house Dealogic said ABN Amro was the fifth-ranked investment bank in terms of equity market capital raisings this year, with 14 deals worth $1.4billion.

Royal Bank of Scotland is conducting the sale. It was part of a consortium that acquired the Dutch-based ABN Amro last year for about $US100 billion. RBS has been looking at asset sales to repair its balance sheet after writing off billions in the wake of the global credit crunch.

Documents lodged with the Australian Securities and Investments Commission show ABN's Australasian business reported a profit of more than $131 million for the year to December 31 and paid a dividend of $158.9 million.

According to reports, the price tag for the ABN business could be between $800 million and $1 billion, but not everyone is sure it would be a good fit.

"I'm not convinced that commercial banks should be buying investment banks," Brett Le Mesurier, a banking analyst at Wilson HTM, said. "They're very different types of businesses."

The more worrying news for NAB investors was confirmation that a worsening global credit environment was expected to take a further toll on its $1.1billion collateralised debt obligations exposure.

At its half-year result in May, NAB announced a $181 million provision against its exposure, but the bank said yesterday the deteriorating economic environment meant "there continues to be a risk that further provisioning may be required". -- With AAP