SYDNEY: National Australia Bank Friday agreed to pay Aus$85 million (US$88 million) to settle a class action brought by shareholders over the lender's exposure to toxic mortgage assets in the United States.
The proceedings commenced in November 2010 over losses suffered as a result of the bank's exposure to collateralised debt obligations (CDOs) heavily exposed to the US subprime residential mortgage market.
The US mortgage market became toxic in 2007 and early 2008, according to the law firm leading the class action Maurice Blackburn, which led to a plunge in the bank's share price when the extent of the exposure became known.
NAB, Australia's fourth biggest lender, had previously vowed to vigorously defend the action, which was reportedly brought by around 7,000 investors.
"The settlement of the class action is a purely commercial decision made in the interests of our shareholders," said NAB company secretary Michaela Healey in a statement.
"We are pleased to put this matter behind us so that we can continue to focus on improving returns for our shareholders without the distraction and significant expense of a lengthy trial."
The bank agreed to pay Aus$85 million in the settlement, plus an allowance for interest and costs.
Those costs will be covered by insurance and existing provisions, and therefore would have an immaterial impact on NAB's earnings in the current fiscal year, the bank added.
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