(21 October 2008 – Australia) National Australia Bank has reported an increase in underlying profit that was hit by provisions and conduit costs.NAB’s net profit for the year ended September 30, 2008 fell by 0.9 percent to A$4.54 billion from A$4.58 billion in 2007.
Cash Earnings, the normalised profit results looked at by analysts, at A$3.92 billion, fell in line with investor expectations.
The 10.7 percent fall in Cash Earnings included a A$1.01 billion provision for possible losses on a A$1.2 billion portfolio of CDOs and a A$100 million charge for risk mitigation; hedging on exposure to conduits.
Underlying business performance, however, remained sound with cash earnings up 7.7 percent to A$4.7 billion excluding the after tax impact of the bad and doubtful debt charges and associated risk mitigation strategy.
NAB group chief executive officer, John Stewart, said that in an extremely difficult environment, each of the bank’s businesses delivered strong underlying results.
The Australian banking division recorded the greatest increase in cash earnings, with an increase of 15.8 percent to A$3.3 billion. Much of the fall in group profit came from nabCapital, with cash earnings of A$715 million last year deteriorating to a loss of A$44 million.
Cash Earnings in Australian Banking grew significantly over the past year for NAB, with both business and retail banking achieving large growth.
The Business and Private Banking division grew 18.7 percent to A$2 billion, while the Retail Banking division rose by 18.0 percent, to A$900 million.
Stewart also said that NAB’s Tier 1 capital was strong at 7.35 percent and A$28 billion of term funding was raised during the year, with a four year average maturity.
At 97 cents per share, the final dividend was consistent with the interim dividend.