National Australia Bank Profit Rebounds, Dividend Steady

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--National Australia Bank Ltd. (NAB.AU) held its final dividend steady following a rebound in annual profit, after being squeezed the year before by asset sales.

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Net profit surged to 5.29 billion Australian dollars (US$4.05 billion) in the year through September from A$352 million the year before when it absorbed losses on its exit from its British banking assets and the sale of a majority stake in its life-insurance business.

Cash earnings--a measure that strips out sold businesses, treasury shares and other items--rose by 2.5% to A$6.64 billion for the fiscal year, meeting expectations.

The bank said it would again pay a half-year dividend of A$0.99 a share, for an unchanged full-year payout of A$1.98.

Like the country's other major banks, NAB has moved to tighten its focus on its core franchises in Australia and New Zealand and shed capital-intensive operations to tackle a sluggish revenue environment and more recent signs a booming property market has begun to cool in big cities including Sydney. Since taking over as chief executive in late 2014, Andrew Thorburn has spun off and listed CYBG PLC (CYBG.LN), a company housing Clydesdale and Yorkshire Bank in the U.K., sold an 80% stake in its insurance arm and also listed regional U.S. lender Great Western Bancorp Inc. (GWB).

The banks continue to benefit from relatively low levels of soured loans and dominant positions in the mortgage market, though regulatory and political scrutiny has built over the last couple of years, resulting in the need to bolster capital buffers, cool riskier lending and absorb a new tax on liabilities imposed by Canberra this year.

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NAB said its charges for bad and doubtful debts were up 1.3% on-year at A$810 million, including an increase for potential risks relating to commercial real estate, retail trade and the mortgage portfolio. However, the ratio of loans 90 days or more overdue and gross impaired assets to gross loans contracted by 0.15 percentage point to 0.7%.

The bank's revenue grew by 2.7% to A$17.9 billion, narrowly outpacing a 2.6% increase in expenses that included job losses over the period. Its net interest margin, a profit measure based on the difference between the rate at which a bank borrows and lends, contracted by 0.03 percentage point to 1.85%, although it widened by 0.06 percentage points in the second half of the fiscal year.

Mr. Thorburn said the bank planned to increase investment by A$1.5 billion by the end of the 2020 fiscal year to grow the bank and reshape its workforce, and was targeting cost savings over that period of more than A$1 billion. About 6,000 jobs are expected to be cut over the coming years, partially offset by the creation of 2,000 new roles, the bank said.

Last week, Australia & New Zealand Banking Group Ltd. (ANZ.AU) CEO Shayne Elliott cautioned the environment for revenue growth is expected to remain constrained in 2018 by intense competition and the effect of regulation, including the Australian bank tax.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

November 01, 2017 17:47 ET (21:47 GMT)