January 28, 2004 will mark the second
anniversary of National Australia Bank’s sale of its strategic stakes
in AMP and St George – a move it did at the height of the foreign
exchange scandal.

Whilst NAB’s new broom of John Stewart, Ahmed
Fahour and Michael Ullmer are making lots of noise about their
turnaround program, the fact remains that the Commonwealth Bank’s
market capitalisation lead over NAB hit a record $4.8 billion yesterday
($56.85 billion vs $52.05 billion) and part of this can be put down to
these ill-considered sales.

NAB announced an after-tax profit of
$322 million from the disposals, which more than offset the $252
million after-tax loss from the currency trading scandal. However, the
shares they sold for $993.2 million are now worth $1.582 billion.

The share sales broke down as follows:

St George ordinaries – 39.5 million sold at $19.02 a share for $751.3 million.
St George PRYMES – 150,000 sold at $107.33 a share for $16.1 million
AMP – 42 million sold at $4.50 a share for $189 million.
HHG – 35 million sold at $1.05 a share for $36.8 million

The foregone profits and current prices break down as follows:

St George ordinaries – closed at $29.76 yesterday so stake worth $1.175 billion and profit foregone $422 million.
St George PRYMES – little change.
AMP – closed at $7.88 yesterday so stake worth $331 million and profit foregone $142 million.
HHG – closed at $1.76 yesterday so stake worth $61.6 million and profit foregone $25 million.

The total foregone profit is $589 million. Then again, NAB’s share
price has risen from $29.45 to $32.56 over the same period – a gain of
10.56%. The only problem is that the other three big banks have soared
by more than double that amount and CBA in particular is up from below
$30 to more than $44, a gain of almost 50%.

If NAB had their time again they should have soldiered on and bought AMP, which has a similar record of ill-timed sales in Axa, Stanbroke Pastoral and Henderson, let alone the billions they appear to have lost getting out of UK equities near the bottom of the cycle in early 2003.

Then again, with the market powering to new highs, anyone who sold a
share in the past few years must be feeling pretty silly, myself
included.