National Bank

National Bank's $575M writedowns not as bad as expected: analysts

Date November 19, 2007

Brief National Bank of Canada has reported the largest credit crunch-related hit of all the six major Canadian banks, posting a pre-tax fourth-quarter charge of $575 million and, unlike the other large banks, no offsetting gains.

The Montreal-based bank - Canad

National Bank of Canada has reported the largest credit crunch-related hit of all the six major Canadian banks, posting a pre-tax fourth-quarter charge of $575 million and, unlike the other large banks, no offsetting gains.

The Montreal-based bank - Canada's sixth-largest lender - announced Monday that the writedown was related to its holdings of about $2.25 billion of non-bank asset-backed commercial paper (ABCP), which is more than 25 per cent of the value of its total holdings for this kind of debt.

After taxes and other adjustments, the hit will amount to approximately $365 million.

"National Bank's ABCP charge is based upon its valuation estimate of its ABCP holdings which considers the current market conditions affecting the underlying assets of the trusts and National Bank's expectation that it may be a long-term owner of this ABCP or the instruments, which could replace these notes following the proposed restructuring contemplated by the Montreal Accord," the bank said in a statement.

As well, while other banks hit by ABCP-related writedowns benefited from large gains due to the restructuring efforts of Visa and Mastercard, National Bank was not as fortunate in this respect.

In addition to about $150-million-worth of ABCP the bank already had on its balance sheet, National Bank was also affected by its decision to buy $2.1 billion in third-party commercial paper in the fourth quarter from its own sponsored mutual funds and pooled funds, as well as ABCP held by its retail clients