MELBOURNE - The National Australia Bank announced Thursday that it has taken a $450 million writedown, or $288 million after taxes, on the sheet value of HomeSide Lending Inc., its U.S. mortgage subsidiary.

NAB bought HomeSide in 1998 for about $1.2 billion, but indications that the purchase has not worked out have surfaced recently. The bank's chief executive, Frank Cicutto, reportedly told European analysts last month that a sale of HomeSide is likely.

The writedown reduces the carrying value of HomeSide's net assets on NAB's balance sheet from $1.3 billion to $1 billion. The company cited unprecedented refinancing activity in the United States, which may reduce income from the mortgage servicing portfolio; "extreme volatility" in U.S. interest rate markets, which has adversely affected HomeSide's hedging positions; and changes in accounting standards.

"In this environment HomeSide's previously successful risk management systems were not fully effective," the company said in a press release. "The size of this provision is a very prudent response to the current volatile environment as well as possible future deterioration."

Mr. Cicutto said the bank's business remains strong and should show earnings per share growth of 10% this year.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.