The bank, which owns Yorkshire Bank and Clydesdale Bank, said the A$830m writedowns were unlikely to impact on its UK operations, and were based on a "worst case scenario".

NAB blamed the worsening credit crunch and said it had set aside enough to cover nearly 90 per cent of its £576m (A$1.2bn) asset-backed collateralised debt obligations (CDOs) portfolio.

"This provision reflects the unprecedented conditions in global credit markets and, in particular, the rapid deterioration in the US housing market," said NAB chief executive John Stewart.

"Detailed analysis and recent default activity indicates the portfolio will continue to deteriorate. We believe it is prudent to take a full provision now, based on a worst case scenario."

The CDOs had a AAA rating when they were bought, said Mr Stewart, and he defended their purchase. "If we wouldn't invest in AAA assets, then quite frankly we wouldn't invest in any Australian company, we wouldn't lend to any of them."

The writedowns come little over a month after Michael Chaney, chairman of National Australia Bank, visited Yorkshire and spoke of the bank's stability.

"The NAB is in extremely good shape," he told diners at the Yorkshire Bank event at Castle Howard. "The Australian banks have taken a more conservative approach to risk. You are dealing with a very stable and secure organisation. I'm able to assure you that. We are there for the long haul."

Analysts criticised the bank for failing to provide a full picture of its exposure, despite announcing £87m (A$181m) writedowns at the end of March.

"It's certainly very disappointing in light of what we were told at the half-year results," said Mark Nathan, fund manager with Fortis Investment Partners. Eric Betts, equities strategist at Nomura Australia, said: "One hopes there is nothing more lurking."

NAB said it expects a profit hit of just under £288m (A$600m) from the provision, which could wipe out nearly a quarter of its second-half earnings based on market expectations. Ahead of yesterday's announcement, analysts had estimated NAB would earn core second-half profit of about £1.08bn (A$2.25bn).

But NAB said its final dividend would not be affected by the new writedowns and that it would stick to a payout ratio of around 70 per cent of earnings. NAB shares fell as much as 14.6 per cent to A$26.22 before ending down 13.5 per cent, their biggest one-day percentage fall since October 1987.

A NAB spokesman said the writedowns were unlikely to have an impact on the group's UK operations.

He said: "Clydesdale and Yorkshire banks run their own debt funding business and are quite discrete businesses. They have their own CEOs and own management. The way the banks have been run in the UK are different."

He argued the NAB has been upfront about its exposure to risky US mortgages, after announcing writedowns in March and again warning of its exposure earlier this month.

He said: "Having talked about it at the half year and in July we felt we were trying to, as information came available, pass it up to the market. When we made that provision (in March) we were making it in a difficult but starting to improve position. We have seen a dramatic worsening in the US situation and we need to look at a number of things that have happened since.

"Whilst A$830m is a large sum, by comparison with other writedowns it's by no means leading the league table."