The Canadian Press
National Bank (TSX:NA) says the $75 million it must pay to settle accusations of misdealings in the asset-backed commercial paper market will not impact its 2010 performance.
Shares in the Quebec-based bank dropped $1.79 to $60.03, faring significantly worse that the rest of the financial industry, which was up one point on the Toronto Stock Exchange Tuesday.
National Bank will pay the majority of the $138.8 million in settlements reached Monday between regulators and seven Canadian financial institutions for their role in the ABCP meltdown.
National Bank’s will pay a $70-million fine, $1 million in investigation costs and $4 million to be invested in an education program for investors.
“National Bank has the financial solidity to face such an expense,” said its senior adviser Joan Beauchamp, who added the fine will come out of the bank’s first-quarter earnings.
Desjardins Securities reduced its 2010 earnings per share outlook for National Bank by 9% or 45¢ from $4.90 to $4.45 per share following the settlements Monday.
“The cost of these settlements is considered one-time and was within the range expected. So we are not adjusting our target prices or recommendations for these banks,” Dejardins analyst Michael Goldberg wrote in his report.
The Dejardins report noted National remains sensitive to the valuation of ABCP after it repurchased $2.1 billion worth from retail investors. Desjardins said the portfolio was valued at $1.16 billion at year-end.
Desjardins also adjusted its 2010 earnings per share forecast for Scotiabank (TSX:BNS), CIBC (TSX:CM), which were cut 5¢ each to $3.60 and $5.90 respectively, and Laurentian Bank (TSX:LB) from $4.60 to $4.45.
The banks are also expected to recognize the fines in the first quarter of 2010.
The institutions were accused of failing to protect investors from the risks involved in the short-term, high yield investments when the Canadian ABCP market ground to a halt in August 2007 amid fears the assets behind the notes included U.S. subprime mortgages and other high-risk loans.
National Bank says $75 million settlement won’t impact 2010 performance or share value
Desjardins Securities adjusts EPS forecasts for Scotia, CIBC and Laurentian
- By: Sunny Freeman
- December 22, 2009 December 22, 2009
- 17:11