National Australia Bank (NAB) today announced the additional provision of $830 million to its portfolio of 10 CDOs (collateralised debt obligations) of asset-backed securities.
The portfolio, containing US residential mortgages, is now provisioned to almost 90 per cent, after the bank already set aside $181 million to cover the portfolio earlier in the year.
John Stewart, NAB chief executive officer, said the provision was the result of “unprecedented conditions in global credit markets” and, particularly, the “rapid deterioration” of the US housing market.
Although current losses on the assets underlying the CDOs average just twe per cent of the bank’s total portfolio, Mr Stewart said market analyses and default activity suggested the portfolio would continue to deteriorate.
“We believe it is prudent to take a full provision now, based on a worst case scenario,” he said.