Michael Chaney will no doubt be looking forward to a warm home town welcome when he chairs the first ever National Australian Bank AGM in Perth on 7 February.

However, his recent attack on investor short-termism after the negative reaction to NAB’s $917 million purchase of the South Dakota-based Great Northern Bancorporation, suggests there is growing frustration about the relative decline of what was once indisputably Australia’s biggest bank.

CEO John Stewart originally declared he was “here for the war not the peace” but that two year contract with the one-way ticket back to the UK was extended by new chairman Chaney in 2005 when he felt neither Ahmed Fahour or Sydney-based CFO Michael Ullmer were ready to take over.

A chairman in Perth, a Pom running the show from Melbourne and a CFO in Sydney is not what you’d expect from a well-oiled banking machine which is continuing to decline — relative to its peers.

The market does appear a little nervous about the $34 billion in off balance sheet risk-weighted liabilities as of 30 September which are progressively coming onto the balance sheet due to refinancing difficulties.

Not that NAB is being particularly open about that. The same applies to the $850 million bailout of Countrywide last August, when NAB stumped up a completely unsecured $300 million as part of a Big Four boys club effort.

Then you’ve got the way NAB’s “independent” funds management subsidiary MLC invests in banking stocks – overweight the owner and underweight the rest.

On 9 January we got this notice that MLC had lifted its NAB holding to 2.75% after buying a further 427,786 shares on 21 December.

That would probably make MLC the biggest NAB shareholder. So while Michael Chaney was attacking fund managers for short-termism, MLC was out there buying more NAB shares at prices between $36.71 and $38.51 – well shy of last night’s close of $34.74, when MLC’s 44.5 million NAB shares were worth $1.56 billion.

Chaney presumably isn’t a licensed financial adviser, but perhaps he’s worried NAB is heading towards the cellar. This is how the Big Four market caps stood at the close of trading last night:

  • CBA: $69.4 billion
  • NAB: $56.76 billion
  • ANZ: $49.79 billion
  • Westpac: $47.73 billion.

Not until the past few weeks has NAB found itself further behind CBA than it is ahead of Westpac and ANZ. There was a time in 1992 when NAB’s market cap almost exceeded the combined value of ANZ, Westpac and the 30% of CBA that had been floated.

How times have changed.

Today’s Mayne Report video reveals the dramatically expanded scope of the world’s biggest small share portfolio and the escalating losses incurred.

Peter Fray

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