The National Australia Bank is back in the banking game in Australia after three tough years.
While the top line profit for the National Australia Bank rose 7.1 per cent in the March half to $2.136 million, the more widely used cash earnings from continuing operations metric showed a much sharper rise.
The NAB said cash earnings rose 22.8 per cent to $2.196 billion.
The difference in the comparison was because of a boost of $270 million in a one-time gain on U.K. employee pension costs in the first half of 2006.
Without it profit rose almost 23 per cent on a cash basis which was the best of the big four banks to report their March 31 interims.
St George reported cash earnings of $568 million, up 14.7 per cent; the ANZ said its cash earnings rose almost 12 per cent to $1.936 billion, while Westpac said its cash earnings were up 11 per cent at $1.678 billion.
The Commonwealth has a June 30 financial year and has said that its 2007 earnings will equal or better those of its peers; which is the quartet who have reported over the past three weeks.
That means investors can look for earnings growth of 10 to 12 per cent or more from the CBA, if that update of a month ago holds true.
The NAB said its banking cost to income ratio fell to 50.3c in the dollar from 55.6c a year earlier, which is a big improvement.
But St George is down around 42c, the ANZ about 45 (with no funds management) and Westpac is in the same ballpark so the NAB clearly has a lot of work to do.
The bank said costs were flat in the year while revenue rose 8.5 per cent which explains the sharp drop in the cost to income ratio.
Reported revenue rose 8.5 per cent to $22.038 billion and NAB’s return on equity improved to 16.9 per cent, from 15.4 per cent in the same period last year.
“The increase in shareholder return has been achieved while continuing to invest in all our businesses
“This is a good all round result,” NAB chief executive John Stewart said yesterday.
“We increased revenue and lending, with flat operating costs and a stable net interest margin.
“This demonstrates our progress in improving all aspects of our business.
“We have outlined the strategy for each business and these results show pleasing progress, although more remains to be done.”
Mr Stewart said that in Australia the rise in the provision for bad and doubtful debts reflected relative weakness in the New South Wales economy.
Mr Stewart said the economic outlook for the bank’s Australia, New Zealand and UK operations was positive.
“They’re all looking slightly different but they are all looking good, therefore we have a positive outlook in economic terms,” he said.
NAB shares fell 93c to a low of $43.10 before recovering to around $43.63.
The bank will pay a first-half dividend of 87c a share, up from 83c in the first half of 2006.
