NAB sells off HomeSide
National Australia Bank (NAB)has rid itself of its troubled American mortgage business, HomeSide, after offloading it to Washington Mutual Inc for $3.7 billion.
The sale is said to include all the operating assets and operating platform of HomeSide.
The Florida-based business, acquired by NAB in 1997 for $1.7 billion, made spectacular losses of more than $3 billion as a result of bungled interest-rate calculations, which were announced soon after discovery in the first days of September this year.
NAB chief executive Frank Cicutto vowed on September 3 that NAB would never again revisit mortgage products in foreign markets. Three top executives of Homeside were forced to resign at the time, while NAB announced that it planned to free itself of its Homeside commitments by Christmas.
NAB says it will retain control of the mortgage servicing rights and related financial hedges at the date of completion. The bank says the sale should marginally strengthen its capital ratio.
“This is a good deal in a tough selling environment, providing a range of benefits,” Cicutto says.
NAB says the sale allows it to exit the operating business and eliminate the risk associated with further generation of mortgage servicing rights, while also increasing liquidity in freeing up capital.
Washington Mutual will service the Australian loan portfolio for up to two and a half years using the existing platform. But NAB will continue to retain the rights to the HomeSide brand name and technology outside North America.
The deal is expected to be completed in the first quarter of 2002.
AUTHOR
Lachlan Gilbert
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