National Australia Bank Ltd. shareholders sued to recover about A$450 million ($442 million) they claim was lost as the bank’s stock declined because of its exposure to U.S. subprime debt in 2008.
Maurice Blackburn Lawyers, an Australian firm with 20 offices along the east coast, filed the lawsuit on behalf of shareholders today in Supreme Court in Melbourne.
National Australia Bank failed to disclose at the beginning of 2008 that it had “serious exposure and serious risk of losses,” from its subprime mortgage exposure, Andrew Watson, Maurice Blackburn principal, said at a news conference today.
National Australia Bank shares fell 36 percent from July 24, 2008, to Sept. 18, 2008, after the Melbourne-based bank boosted provisions for its exposure to U.S. subprime mortgages to A$1 billion from A$181 million in early May of that year. The bank held A$1.2 billion of collateralized debt obligations, structured debt securities that are backed by bonds or loans.
Shares of National Australia Bank were little changed at A$24.37 at the 4:10 p.m close of trading today in Sydney.
The U.S. subprime-mortgage market collapsed in 2007, triggering a global financial crisis.
National Australia Bank plans to defend against the claim, it said today in a statement to the Australian Stock Exchange.
The potential for a lawsuit was disclosed to shareholders in the 2009 and 2010 annual reports, the bank said.
Maurice Blackburn plans to ask the judge to order National Australia Bank to disclose the CDOs it held, Watson said. So far, the bank has refused to identify the debt securities, he said.
National Australia Bank should have been aware of weakness in the subprime mortgage market in the U.S. as early as 2006 and was obliged to disclose its risk and exposure at the beginning of 2008, Watson said. By setting aside A$181 million to cover bad subprime debt, the bank boosted investors’ confidence, encouraging them to buy shares, Watson said.
Some 250 shareholders, including institutions, signed up for the lawsuit, which is being funded by International Litigation Funding Partners.
Watson said the institutions, which he described as “some of the world’s largest,” have declined to be named at this time. Investor losses range from a few thousand dollars for individual investors, to tens of millions for some of the institutions, Watson said.
The first hearing in the case, which may take two to four years to resolve, is scheduled for January, Watson said.
“When companies disclose information, it needs to be accurate,” George Vlachos, owner of a vending machine supply company in Sydney who is the lead plaintiff in the case, said at the news conference.
The case is Between Pathway Investments Ltd. and National Australia Bank Ltd. SCL2010-6249. Supreme Court of Victoria (Melbourne).