NAB seeks to reassure investors with bond return

National Australia Bank Ltd has refunded hundreds of millions of dollars to irate investors who bought into a bond sale just days before the bank announced a surprise writedown. NAB, Australia's biggest bank by assets, said it gave investors the choice to opt out of their commitment to an A$850 million ($814.2 million) bond issue sold early last week.
Buyers had reacted angrily after the bank announced on Friday it would book a further $800 million in losses on its exposure to US subprime mortgages. Analysts said the decision to allow investors to reconsider was unusual but welcome.
"It was a reputational move. They issued the bonds immediately before the bad debt write down...they tried to restore their reputation, and that move was needed," said Angus Gluskie, a portfolio manager at White Funds Management. The bond issue was reduced to A$260 million, said several fund sources, who asked not to be identified.
"They need to keep those channels of funds open and they need to keep access to the market. From their point of view it is probably a good idea, but some of the bond holders were probably surprised," said Rohan Walsh, investment manager at Karara Capital.
NAB's executive director Ahmed Fahour on Tuesday sought to offer some reassurance about the bank's performance. "While we certainly see some difficulties in some markets, particularly confidence - people's confidence - is decreasing, the underlying performance of our business is very good," Fahour said on the sidelines of a conference.
Australian banking shares were down Tuesday, with NAB shares down 2.8 percent at A$25.08 at 0515 GMT, compared with a 1.4 percent fall in the wider market. Shares in NAB tumbled on Friday after it set aside A$830 million ($795 million) in provisions against potential losses on its exposure to US mortgages.
Australia's banks had previously been seen as largely unaffected by global credit ructions, but sentiment took another battering on Monday when Australia and New Zealand Banking Group (ANZ) warned that its profits would fall sharply and forecast more than A$1 billion in bad debt charges. ANZ shares were down 1 percent while Commonwealth Bank of Australia was down 3.8 percent and Westpac Banking Corp fell 0.9 percent.