National Australia Bank Limited’s (NAB) net profit to the year ended 30 September slumped 42.9% from $4.54 billion to $2.59 billion from the previous corresponding period. The bank attributed the slide in profit to legal and tax proceedings, as well as the bank’s investment in the Efficiency, Quality & Service program.
Revenue increased 8.9% to $17.7 billion.
NAB reported underlying profit increased by over $1.1 billion, or 14.6% on the back of strong results from the Australian business banking and Nab Capital markets.
However cash earnings, the banks preferred measure of performance, declined as the bank continues to be hit by bad debt provisions as customers struggle to repay debts in the difficult economic conditions which persisted for much of the year.
“Deteriorating asset quality and high funding costs caused cash earnings to fall by 1.9% to $3.8 billion,” NAB Group CEO Cameron Clyne said.
The bank booked this charge at $3.8 billion this year, up $2.3 billion from last year.
Total provisions, which include credit risk adjustment on assets at fair value, increased from $3.3 billion to $5.1 billion.
The bank also booked losses related to litigation of $179m, while previously announced charges of $532 million to the New Inland Revenue and $309 million to the Australian Taxation Office were also incurred.
Mr Clyne said the result was good when considering the group revenue growth.
The Efficiency, Quality and Service program, which focuses on reshaping the business, cost the bank around $254 million after it was accelerated during the year.
However this was expected to be recouped with additional benefits of $336 million flowing into the banks coffers from next year.
Looking ahead, Mr Clyne restated the banks key targets.
“The Group’s priorities remain: to keep the bank safe with conservative management of capital and funding; to maintain tight control of costs; to invest in our people, our leadership, our culture and our reputation; and to pursue growth in our Australian franchise, while preserving value and the options for longer term growth internationally,” Mr Clyne said.
Turning back to the company’s results for the year, earnings per share slumped 16.8% to $1.975 per share, as the company’s recent capital raising dilute the value of NAB stock.
In Australia, revenue growth from the retail banks was 10.3% despite championing itself as taking leading position on fees for Australian retail customers.
Australian cash earnings fell by 5.3% to $2.8 billion in 2009, while underlying profit was up 16.1% to $5.5 billion. Gains from the Business & Private Banking division were challenged by an increase in bad and doubtful debts rising $603 million to $1.6 billion.
The board declared a final dividend of 73c per share, bringing the 2009 total to $1.46 per share, or 24.7% lower than the 2008 figure.
In the UK, which has been an achilles heel for NAB’s earnings in recent times, the bank delivered cash earnings of £78 million.
”The reduction reflected an increase in the charge for bad and doubtful debts from £175 million to £421 million with underlying profit of £529 million up 2.1%,” the bank said.
”The outlook for 2010 is that it is not expected to worsen, but should be qualitatively different from 2009, as the consequences of the recession work their way through the economy.”
At the close Tuesday, NAB shares were trading at $30.70.
