Wholesale Banking Performance Analysis

75 76 Specialised Group Assets - SCDO update In 1H12, removed the 'sold protection' on the last two remaining SCDOS What we have done ▸ Exited the 'sold protection' of the last two remaining SCDOS ▸ Terminated one original CLN note and novated the corresponding hedge (at no cost to NAB) Impact ▸ Removed $600m of credit risk ▸ $1.5bn RWA reduction ► $141m of hedge premium cost accelerated ▸ MTM 'noise' has been removed Regarding the remaining SCDOS ▸ Two fully hedged positions remain with one credit event during the first half ▸ As at 31 March, there is no longer any unhedged SCDO risk ▸ During the current half the final SCDO MTM was a positive $17 million ▸ The recognition of remaining hedge costs related to the SCDO risk mitigation trades have been accelerated by expensing the carrying value of these hedge costs to non-cash earnings ▸ During the March 2012 half year, $141 million ($99 million after tax) of such costs were expensed through non-cash earnings ▸ The $160 million provision overlay for conduits and derivatives has been used to absorb the residual costs SGA Conduit Portfolio Summary1 Movements between September 2011 and March 2012 Sep 2011 Asset Backed CDO A$0.2bn (A$1.6bn) National Australia Bank Mar 2012 Corporates (SCDOs) A$1.3bn Credit Wrapped ABS A$0.6bn Decrease due to repayments, maturities and terminations (A$0.1bn) Decrease in exposure due to foreign currency exchange rate movements Corporates (SCDOS) A0.5bn Credit Wrapped ABS A$0.5bn CMBS A$0.6bn Infrastructure Bonds A$0.2bn Credit Wrapped Bonds A$0.5bn Leveraged Loans A$1.4bn Subscription loans A$0.4bn Mortgages A$0.2bn A$5.4bn CMBS A$0.5bn Infrastructure Bonds A$0.2bn Credit Wrapped Bonds A$0.5bn Leveraged Loans A$1.3bn Mortgages A$0.2bn A$3.7bn² (1) Includes Group's exposures (drawn and available to be drawn) initially funded by NAB sponsored and third party sponsored asset backed commercial paper conduits and SPE purchased assets (2) Specialised Group Assets has removed the economic risk associated with the six sold protection SCDO derivative exposures National Australia Bank

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