Why you should avoid National Australia Bank Ltd. in one simple chart

National Australia Bank Ltd (ASX:NAB) has a very shaky track record.

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Once again National Australia Bank Ltd (ASX: NAB) is in the spotlight for the wrong reasons.

This time it's the findings of the UK parliament's Treasury Select Committee which has thrust NAB into the financial media's crosshairs.

In an investigation into the sale of interest rate hedging products, today's Australian Financial Review quoted the Committee's chairman, Andrew Tyrie, as saying the internal review system of NAB's Scottish-based subsidiary, Clydesdale Bank, had "serious shortcomings."

NAB has been plagued by its foreign exposure for many years and in 2014 alone its, "legacy UK conduct related matters" accounted for some $1.4 billion in provisions. At the time, recently appointed CEO Andrew Thorburn described the results as "disappointing."

In total, NAB reported $2.9 billion in provisions throughout 2014. This included "operational risk event losses", employee entitlements, restructuring and miscellaneous costs.

Since taking office Mr Thorburn has sought to remove all non-core assets, including NAB's two UK banks, Clydesdale and Yorkshire, from its balance sheet. So far, he has successfully taken Great Western Bancorp (NAB's U.S. agribusiness bank) to the public market.

It is also believed he is actively considering floating Clydesdale Bank on a public market sometime in late 2015.

Should you buy NAB shares?

NAB bad debts
Total provisions for bad and doubtful debts reported by NAB versus rivals. Source: Company annual reports.

As is evident from the table above, compared to its peers, NAB's recent track record is very poor. It has been filled with huge provisions for bad and doubtful debts, despite a falling interest rate environment.

Therefore given its poor track record, recent rally in share price and the subdued economic outlook, investors would be wise to avoid NAB shares until it completely rids itself of its troubled international businesses once and for all. Whilst Mr Thorburn appears to be off to a good start, investors are advised not to hold their breath because many management teams have come and gone trying to do the same thing.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the companies mentioned in this article. Owen welcomes your feedback on Google plus (see below) or you can follow him on Twitter @ASXinvest. The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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