NAB faces class action on toxic debt while St George hit with legal claim over bonus payments

Melbourne-based law firm Maurice Blackburn is set to launch a $450 million class action against National Australia Bank on behalf of shareholders, who claim the bank took too long to disclose the fact it holds $1.1 billion worth of collateralised debt obligations, the toxic debt instruments at the heart of the 2008 banking crisis.

Meanwhile, a group of former St George Bank managers have launched action against their former employer in the Federal Court over the non-payment of bonuses they say they are entitled to.

The NAB lawsuit, to be filed in the Victorian Supreme Court today, comes almost two-and-a-half years after NAB first revealed its real exposure to the CDOs.

In May 2008, with the GFC in full swing, the bank booked a $181 million provision against the CDOs, but just three months later announced it would take an $830 million provision against the $1.1 billion portfolio.

The announcement sent NAB shares falling 16% in two days to $25.80. The shares are still trading just below $25.

The lawsuit is open to shareholders who purchased NAB shares between January 1, 2008 and July 25, 2008.

“We are not saying NAB was right or wrong for buying these things,” Maurice Blackburn lawyers Andrew Watson told the Australian Financial Review.

“It may or may not have been sensible. What we are saying is that when there are trends going on for a year, NAB should have told the sharemarket earlier.”

In the St George case, a group of former St George managers have filed a Federal Court action claiming they were denied generous retention bonuses in 2008.

The managers says then St George chief Paul Fegan promised the bonuses if earnings per share growth hit 8-10% and say that as earnings per shares were 8.3% that year, there were entitled to get their bonuses.

But the bank says the target was changed to 10.1% at a special directors meeting after Fegan had told the bankers their targets.

A lawyer for the managers said they would “plead deceit” on the basis of “recklessness”.

The case returns to court on December 16.