Ahh, Homeside, remember that little episode well. Interestingly...

Ahh, Homeside, remember that little episode well.
Interestingly the Homeside debacle actually supports the previous poster's (I'm sure) glib comment.
Moving away from the habit of headline hyperbole the Homeside scandal was nowhere "near fatal" to NAB.
Now, to be clear I absolutely agree that the purchase of Homeside was a disaster and I am not trying to defend NAB's position.
The facts, however are:-
- In September 2001 NAB advised the market that it would be writing down the carrying value of Homeside servicing rights and goodwill (purchased within 3 years previous)
- On this news the SP quickly dropped by about 30% to around the $23 level however within 2 months it was back up to the level it was trading at before.
- Annual report was released Nov 2001 which formalised the write down of Homeside assets of $$3.617b (US$1.8b - the exchange rate was not kind either!!)) and it barely registered movement to the SP. (It should be noted that during this year NAB also made a profit in excess of $2b on the sale of Michigan National)
The apparent lack of market concern was because it had no impact on NAB's core business and cash generation. Once the band aid was ripped off NAB could absorb the losses in it's balance sheet.
- By the end of 2001 NAB sold the Homeside business which covered the remaining carried value and I think a small profit.
There have been a number of reports on why the purchase of Homeside failed but it appears to be a combination of factors including a succession of US interest rate cuts which resulted in a large number of Home loan refinancings and it would seem NAB failed in it's risk analysis/controls and hedging!
Basically it seemed to me that it was a classic case of a business buying something which seemed like a good idea at the time but they didn't understand it well enough.
Whatever the reason, little doubt that as well as a hit to the balance sheet, NAB also took a hit to it's previous reputation as a conservative bank and no doubt had to suffer the wrath of the insto's for a while but ultimately it was no where near fatal.
One area which (I think) caused dissatisfaction after the Homeside fiasco was the lack of accountability with reports finding no one in current positions could be held responsible. Homeside was purchased in 1997 when the CEO was Don Argus who was a very strong leader and generally fiercely conservative. Argus left in 1999 and the failure of Homeside happened under the stewardship of Frank Cicutto.
Cicutto, I think was also cleared however he ultimately resigned although not officially due to Homeside. Iirc Cicutto also had a risk background but may have become too ambitious when elected to the top and let controls to others.
While there have been some successes, our banks forays into unfamiliar markets will always be a concern. As I have said before I have no doubt that a CEO from one of the banks will come along one day in the near future and try and make a name for themselves by launching into another market to try and open up another growth alternative. Something I will watch closely if I am holding that particular bank at the time!!