The NAB has emerged in good shape from shedding its troubled UK business.
The bank has maintained its payout to shareholders and posted a strong first half cash profit of $3.31 billion, a 6.5% rise and around expectations of $3.4 billion.
The results puts the bank well on track to beat last year’s $5.84 billion result.
“The decisions we have made over the last two years have resulted in NAB being a stronger and simpler business,” says CEO Andrew Thorburn
“We are focused on improving returns in our Australian and New Zealand businesses and, while there is still more work to do, we have made good progress against our agenda.”
The NAB is the third major bank to report this week. The ANZ posted a 24% fall in cash profit to $2.8 billion and Westpac a below expectations 3% rise to $3.904 billion.
Bad loans were behind the poor performances.
But the NAB fared better than its rivals. Bad debt charges are down 6% to $375 million compared to the same period last year. However, the total charge rose by $26 million or 7.4% compared to the previous half year mainly due to a small number of corporate collapses and provisions for loans in New Zealand.
The NAB’s statutory result was a loss of $1.74 billion, reflecting a discontinued business fall of $4.22 billion from the demerger and float of the the UK Clydesdale bank.
Revenue was down 4.5% to $8.964 billion but dividends have been maintained at 99 cents a share, fully franked.
“This is our first result squarely focused on our Australian and New Zealand business,” says Thorburn.
“It shows that delivering against our strategic priorities is producing results and laying the foundations for sustainable growth and returns. We have a clear plan and are executing it in a disciplined way.”
The NAB’s Australian banking cash earnings increased 5% to $2.694 billion but New Zealand banking local currency cash earnings fell 3% to $NZ404 million, reflecting a downturn in the dairy industry.
“Our NZ banking business produced a solid result this period despite challenges facing the dairy industry,” says Thorburn.
“While we remain confident in the robustness of the underlying New Zealand economy, against a backdrop of sustained low milk prices we have taken a proactive approach to provisioning for future dairy impairments.”
Cash earnings at NAB’s wealth management business increased 12% to $249 million driven by stronger insurance sales.
The headline results: