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NAB delivers $3.3bn profit, flat dividend

Nicholas Grove  |  05 May 2016Text size  Decrease  Increase  |  

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Nicholas Grove is a Morningstar journalist.


National Australia Bank (NAB) on Thursday announced a 6.5 per cent rise in cash profit, a preferred measure of underlying performance among the big four banks, to $3.3 billion for the half year to the end of March 2016.

The bank announced a statutory net loss of $1.74 billion, which includes losses relating to the demerger of the beleaguered Clydesdale operations in the UK.

NAB declared a half-year dividend of 99 cents a share fully franked, flat on the 2015 half-year and final dividends. The dividend will be paid on 5 July 2016 to shareholders on the register as of 18 May 2016.

"This is our first result squarely focused on our Australian and New Zealand business. 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," NAB Group CEO Andrew Thorburn said in a statement.

"The decisions we have made over the last two years have resulted in NAB being a stronger and simpler business. 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."

Morningstar senior equities analyst David Ellis described the result as "impressive" despite it being marginally below consensus expectations of $3.35 billion.

"At long last we have a much cleaner and consistent result from the wide moat-rated bank," he said.

"The outlook continues to improve following the Clydesdale demerger and, in our opinion, key business metrics will continue to improve, resulting in a higher share price for the former serial underperformer.

"Importantly, bad debts remain low at just $375 million, in line with expectations, 6 per cent lower than March 2015 but 7 per cent higher than the historical low $349 million at September 2015."

NAB said its total charge for bad debts related to a "small number of large single name exposures, combined with increased collective provision charges for NZ Banking given the continued challenging outlook facing the dairy industry".

NAB said its expenses rose 4.2 per cent, reflecting investment in priority customer segments as well as increased technology and personnel costs.

The bank said its Common Equity Tier 1 (CET1) ratio was 9.7 per cent as at 31 March 2016, a fall of 55 basis points from September 2015, mainly reflecting the impact of the Clydesdale demerger and IPO, including the conduct indemnity.

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