National Australia Bank (NAB) has sold derivatives that had been a drag on earnings.

Analysts say its shareholders have suffered heavy losses from the move, while the bank is expected to take a $300 million hit.

NAB sold out of hedges for the two remaining synthetic collateralised debt obligations (SCDO) that had acted as a drag on the bank’s revenue in fiscal 2011.

The move would cost it $301 million before tax but have no impact on its cash earnings, Deutsche Bank’s James Freeman said.

NAB has paid $760 million to exit the six SCDOs, making an effective loss rate of 50 per cent, he said.

“This SCDO has turned out to be a very expensive exercise for NAB shareholders.”

Each of the two SCDOs had a face value of $300 million, with the value of one SCDO being fully eroded by losses by September 30, 2011, NAB reported at its 2011 full year result.

They formed part of a portfolio of six SCDO deals, originally worth $1.5 billion that were held within NAB’s $4.5 billion portfolio of corporate bonds, collateralised loan obligations, and commercial mortgage backed securities in 2008.

Those assets were held within NAB’s $17 billion structured credit portfolio, and losses incurred on it forced the bank to make a $830 million writedown in July 2008.

That move prompted a sharp drop in NAB’s share price and later sparked a class action angry shareholders, who alleged the bank had delayed writing down their value, causing shareholders to collectively lose $450 million on the value of their NAB holdings.

NAB will close its books for the first half of fiscal 2012 on March 31, and report earnings to the market on May 10.

NAB’s shares were five cents lower at $24.34 at 1056 AEDT.