(Adds context and details) March 12 (Reuters) - National...

(Adds context and details)

March 12 (Reuters) - National Australia Bank (NAB) said on Thursday it was withdrawing a capital notes offer because market volatility threatens to hit the trading value of the notes.

The country's third-largest lender had said last month it would increase the amount it was looking to raise from its Capital Notes 4 offer to at least A$1.95 billion ($1.25 billion).

Australian stocks have plunged about 24% since the lender's announcement in February, though. A rapidly spreading pandemic has thrashed global financial markets and threatens to bring further disruption to the world economy.

The bank said "market conditions have changed substantially since the offer was launched and ... the ongoing market volatility would be likely to impact on the trading value of the NAB Capital Notes 4."

NAB said it remains well-capitalised, however, with the bank's pro forma common equity tier 1 (CET1) capital ratio at 10.8% as of Dec. 31, 2019.

NAB's capital levels have been under pressure due to A$2.07 billion it had to dole out to compensate aggrieved customers after an inquiry last year revealed widespread misconduct in the financial sector.

This weighed on the bank as it struggled to meet the new CET1 minimum regulatory requirement of 10.5% by Jan. 1, prompting a cut in its dividend and forceing it to raise additional capital last year.

($1 = 1.5555 Australian dollars)