National Bank of Canada has reported the largest credit crunch-related hit of all the six major Canadian banks, posting a pre-tax fourth-quarter charge of $575 million and, unlike the other large banks, no offsetting gains.

The Montreal-based bank – Canada's sixth-largest lender – announced Monday that the writedown was related to its holdings of about $2.25 billion of non-bank asset-backed commercial paper (ABCP), which is more than 25 per cent of the value of its total holdings for this kind of debt.

After taxes and other adjustments, the hit will amount to approximately $365 million.

"National Bank's ABCP charge is based upon its valuation estimate of its ABCP holdings which considers the current market conditions affecting the underlying assets of the trusts and National Bank's expectation that it may be a long-term owner of this ABCP or the instruments, which could replace these notes following the proposed restructuring contemplated by the Montreal Accord," the bank said in a statement.

As well, while other banks hit by ABCP-related writedowns benefited from large gains due to the restructuring efforts of Visa and Mastercard, National Bank was not as fortunate in this respect.

In addition to about $150-million-worth of ABCP the bank already had on its balance sheet, National Bank was also affected by its decision to buy $2.1 billion in third-party commercial paper in the fourth quarter from its own sponsored mutual funds and pooled funds, as well as ABCP held by its retail clients

Analysts had mixed reactions to the news of National Bank's huge writedowns, with some noting that the charges were narrower than expected.

"While the charge is greater than the $400-$500 million that we forecasted, as the Tier 1 ratio remains above 8.5 per cent, we continue to believe that the bank's capital remains strong and that National Bank has the capacity to raise dividends this quarter," Genuity Capital Markets analyst Mario Mendonca wrote in a client note.

RBC Capital Markets analyst Andre-Philippe Hardy wrote that he had predicted a $330-million hit, but gave an "underperform" rating on National Bank's stock, noting he had expected a $200 million in ABCP on the bank's balance sheet.

Meanwhile, John Aiken of Dundee Securities wrote that the provisioning is "one of the highest levels" seen to date, and that the writedowns are in line with expectations.

"However... this is well within the level that is manageable for National from a capital perspective," he said in a client note. "We view National Bank's announcement similarly to Bank of Montreal's: although charges are never a positive, the amount was not as negative as some had speculated and with an actual amount now in the public domain, it should relieve some valuation pressure."