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NAB to acquire Challenger’s mortgage management business Transaction Summary

18 August 2009

Transaction Summary

Business to be acquired

• Acquisition of shares in Challenger Mortgage Management Holdings Pty Ltd

• Mortgage distribution platform and brands

  • PLAN, Choice and FAST[(1)] ‘aggregator’ businesses

• Multi-brand lending

  • White label mortgage product capability (including originator contracts)

  • Relationships with distribution associates (including Homeloans Limited)

• Approximately $4bn residential mortgage loans in existing warehouse structures

• Excludes any interest in non-conforming and commercial loan business

• Excludes approximately $11bn backbook of residential mortgages[(2)] - NAB to receive ongoing fees for providing servicing and administration services to Challenger

Consideration

� Attractive pricing

• Cash consideration for business of $360m[(3)]

  • Additional ~$10.7m for ~17.5% interest in Homeloans Limited and a further ~$14.3m to increase share to ~41% (subject to Homeloans shareholder approval)

  • Loans are acquired at face value less a discount for loan loss provisions

• Expected to be ROE and EPS accretive in year 1

• Estimated reduction in Group Tier 1 capital of 15 basis points[(4)]

• Subject to regulatory approval and no objection from ACCC

Acquisition rationale

Strategic

� Enhanced mortgage broker distribution footprint

• Distribution businesses generating mortgage broker settlements of ~ $33bn in FY09

• Relationships with ~ 5,700 loan writers/brokers nationally and ~ 400 mortgage managers

� Strengthened product capability

• Scalable multi-brand lending capability

• Ability to deliver a broader range of brand and product options

� Expanded opportunity to participate in the evolution of the mortgage broker industry

• Leverage capability developed in managing financial planning networks to facilitate the growing professionalism of brokers, particularly in light of impending regulation

• Potential to work with brokers to broaden range of solutions provided to customers

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Financial
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� Accretive deal with value upside

• Deal pricing underpinned by conservative assessment of value of distribution businesses and mortgage book acquired with appropriate provisioning

• Expected to be ROE and EPS accretive in year 1

Overview of business acquired

Challenger Mortgage Management

Broker distribution platforms

• Key brands

• PLAN

• Choice

• FAST

• Broker services infrastructure

• $110bn in mortgages under administration[1]

Annual flows of approximately $33bn[2]

Multi-brand lending

• White label mortgage business

• Originator relationships

• Product origination/ management platform

• Approx $4bn mortgage book acquired

• Contract to provide loan servicing & administration services to Challenger for retained backbook

Multi-brand scalable IT platform

Associated distribution

• Strategic stake in Homeloans Ltd

Additional distribution footprint

Historical operating performance

Strong growth in Mortgages under Administration

Active loan writers (PLAN, Choice and FAST)[2]

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Mortgages Under Administration
109.5
96.8
76.8
2007 2008 2009
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Approximately
33% 5,700 active loan
writers at June
43%
2009
PLAN
Choice
FAST
24%
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– currently limited by funding constraints ($bn)[3]

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Mortgages under Management
Settlements
19.8
18.8
15.7
5.8
4.0
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• All loans greater than 30 days past due excluded from the acquisition of the loan portfolio.

• Acquired loan book is high quality

• Geographic mix across states broadly aligned to that of NAB/Homeside

• Average loan to Valuation Ratio (LVR) of 72%

Contacts and disclaimer

Disclaimer: This document is general background information about the Group’s acquisition of Challenger Mortgage Management Holdings Pty Ltd current at the date 18 August 2009. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.

This announcement contains certain "forward-looking statements". The words "anticipate", "believe", "expect", "project", "forecast", "estimate", “outlook”, “upside”, "likely", "intend", "should", "could", "may", "target", "plan" and other similar expressions are intended to identify forwardlooking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements.

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