This was in today's Sydney Morning HeraldThere may be more...

This was in today's Sydney Morning Herald
There may be more pressure as institutions sell in the hope of a bargain price to come.

While board directors are meeting in London and in some cases readying themselves to watch a spot of tennis while slurping down strawberries and cream, National Australia Bank is getting a lot of attention from market traders.

The stock has fallen 3 per cent in the past five sessions ahead of the start next week of the bank's 15-day pricing period for its dividend reinvestment plan.

Participating investors in the plan will be keen to get the lowest price possible for the new shares, which they will be getting in lieu of the 83c interim dividend (there's also a 2.5 per cent discount to the market price for shares issued).

There may be extra pressure on NAB's price in the days ahead.

The plan is fully underwritten by Merrill Lynch. This means that Merrill will be seeking on NAB's behalf to raise or sub-underwrite from institutions the amount of the dividend payout ($1.2 billion) that is being paid out in cash to non-participants in the plan. The big question is how big this figure will be and whether it will further depress the NAB share price.

If the DRP participation rate is, say, 40 per cent, Merrill would need to cover the other 60 per cent, being $720 million.

NAB wants to hold on to cash paid out as dividends to increase its capital ratios and keep angry regulators at bay.

This is a sizeable raising for the market to digest, so institutions are thought to be preparing themselves by selling down some of their NAB holdings (and perhaps other bank holdings) to get a chance to buy into NAB at the lower price. The pricing period runs for 15 days starting from two days after today's record date and the final price will be a volume-weighted average for the period. NAB has dropped the 15,000 share participation cap for the DRP, so more institutions can elect to support the turnaround efforts of new CEO John Stewart. NAB finished 11c lower at $29.36.