UPDATE 1.30pm: National Australia Bank will pay $85 million in a settlement of a class action relating to its heavy losses over toxic subprime home loans in the United States.
The action, taken by shareholders, was settled today, pending court approval.
NAB said it would pay $85 million, plus an allowance for interest and costs when the case is settled in full.
Those costs will be covered by insurance and existing provisions, and therefore will have an immaterial impact on NAB's earnings in the current fiscal year.
NAB company secretary Michaela Healey said the settlement does not indicate an admission of liability by the bank.
"The settlement of the class action is a purely commercial decision made in the interests of our shareholders," she said in a statement.
NAB shareholders were seeking damages after a sharp fall in the bank's share price in July, 2008.
NAB in 2006 bought $A1.2 billion of collateralised debt obligations (CDOs) that were heavily exposed to the US subprime residential mortgage market which became toxic debt in 2007 and early 2008, according to the law firm leading the class action, Maurice Blackburn.
NAB first made a $181 million provision for the CDO exposure in May 2008, then increased it to $1.1 billion two months later, sending the company's share price plunging by nearly $6.00.
NAB shares fell $1.06, or 4.26 per cent, to close at $23.81.