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National Australia Bank sells Irish banks to the Danske Bank Group

Amanda Jarvis

December 14, 2004

The profit on sale is expected to be approximately A$1.1 billion.

The National’s Chief Executive, Mr John Stewart, said the sale of the two businesses was a win-win outcome for the National and Danske: “This is an excellent outcome for the National. We have achieved an attractive price for these banks, generating a significant profit and strengthening our capital base. It also opens an exciting new chapter for the two Irish banks and for Danske.”

“Importantly, the sale will allow our leadership team to focus all their attention on our operations in Great Britain. We are committed to retaining and growing these businesses and we are making good early progress on some key strategic projects, including expansion into South East England with our financial solutions centres, the ongoing integration of our banking operations and a revamp of our product range. As such, we are confident that they can generate long-term shareholder value for the National.”

“The National intends to provide the market with more detail about our growth strategy for Great Britain in February. ”

The use of the sale proceeds by the National will be determined when there is greater clarity on a number of issues which have a potential impact on the National’s capital position. These issues include: determining the quantum of 2005 first half restructure charges, removal of additional capital requirements by the Australian Prudential Regulation Authority (APRA) and the impact of new international accounting standards on the National’s capital position. It is unlikely we will have clarity on all of these issues before the National’s 2005 half year results.

The headline price represents a price to book multiple of approximately 2.1 times and a pro forma 2004 price/earnings (PE) multiple of approximately 13.1 times.

As a result of the sale, the National’s ACE ratio is expected to increase by A$1.8 billion from 5.3 per cent to 6.0 per cent.

If the sale proceeds are retained for a full year from transaction, diluted earnings per share will decrease by approximately 2.4 per cent, calculated on a 2004 pro forma basis.

The National will retain the profits from the two Irish banks until the transaction is completed, which is expected to be during the first quarter of calendar 2005.

Transitional services will be provided by the National to Danske in respect of the Northern Bank and National Irish Bank operations to assist in the smooth transition of ownership of those businesses. These transitional services will be provided at cost and are expected to be in place for up to 18 months.

The transaction is conditional upon certain regulatory approvals (consent of the FSA in UK, IFSRA in Ireland, FSC on the Isle of Man and the European Commission). Warranties consistent with this type of transaction have been given and indemnities are provided to protect Danske from certain risks which are adequately provided for by the National (including in respect of any liabilities arising in connection with the High Court investigation).

Employees of Northern Bank and National Irish Bank will transfer with the sale and the Irish management team will be retained by Danske to help grow the business.

National Australia Bank Limited was advised by Lazard & Co., Limited (“Lazard”) regarding the transaction.


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