Page 1 of 3

Nicholas Grove is a Morningstar journalist.

National Australia Bank (NAB) on Wednesday announced a 0.5 per cent year-on-year fall in cash earnings to $5.43 billion for fiscal 2012, in line with recent guidance and Morningstar's expectations for a figure of around $5.49 billion.

The fall in cash profit reflects an increased charge for bad and doubtful debts in the UK and a $250-million increase in provisions, the bank said. Statutory net profit for the year fell 21.8 per cent to $4.1 billion.

NAB said the difference between statutory and cash earnings was primarily due to charges relating to the outcomes of its UK Banking strategic review, provisions for customer redress in the UK, fair value and hedge ineffectiveness, and the effects of adjusting for treasury shares.

The bank declared a fully franked final dividend of 90 cents a share, which brought the full-year payment to 180 cents a share. This was also in line with recent guidance and represents an increase of 4.7 per cent on the dividend paid in fiscal 2011.

The final dividend is payable on 18 December 2012. The record date for the final dividend is 15 November 2012, the bank said.

National Australia Bank CEO Cameron Clyne said the group result reflected both the strength of the core Australian and New Zealand banking businesses and ongoing challenges in the UK.

"The Australian economy has performed well relative to other advanced economies, although business conditions across sectors remain mixed, reflecting the prolonged global uncertainty and weak confidence," he said in a statement.

"The group has taken action on several key issues during the year. While the Australian and New Zealand businesses performed well, ongoing weak economic conditions in the UK led to our decision in April to restructure and refocus UK Banking."

A real setback

The UK Banking division delivered a cash earnings loss of 139 million pounds for the full year due to higher funding costs and 335-million-pound increase in bad and doubtful debts.

The charge predominantly arose from business lending losses as a result of the prolonged economic weakness in Europe, which has particularly affected the UK commercial real estate market.

Morningstar Asia Pacific Equity Research head of financial services, David Ellis, said while NAB's results may have been "pre-released" earlier this month, the bad debts were "a real setback".