The financial and economic volatility has forced the National Australia Bank to bring forward its 2008 earnings report 10 days to next Tuesday, and seen the bank confirm that earnings will be lower.
The country’s biggest bank by assets said that it expects full-year cash earnings to drop 11% to about $3.9 billion. For the previous business year, cash profit was $4.4 billion.
The decision to advance the reporting date was made three weeks ago, according to yesterday’s statement, but doesn’t mean any material announcement will be made.
There are reports, however, that the bank will be seeking to raise more capital via the dividend reinvestment program and other measures. $2.5 billion has been mentioned in some reports as the sum that will be sought.
The bank reported an 8% advance in first half (to March 31) cash earnings to $2.2 billion.
As the bank had cash earnings of $2.37 billion in the September half of 2007, the forecast for the 2008 financial year of an 11% drop to $3.9 billion suggests a drop in the September 2008 half of $600 million or more.
That would produce a second half drop of around 34%.
The bank said today it would bring forward its full-year reporting date by 10 days to October 21 due to provide clarity amid recent financial market turmoil, but added in a statement that the change did not foreshadow any proposed material announcement.
NAB also said it expects its final dividend to match its half-year dividend of $0.97.
The 11% drop in cash earnings is in line with market expectations.
Last month, NAB, which has the biggest exposure to US subprime related debt among the big four banks, said it had increased hedges against $1.6 billion in synthetic CDOs, giving the bank new protection levels which would withstand the worst default rates in the past 90 years.
It has already announced write-downs and losses on those CDOs of $1.1 billion.
The bank said hedging and related actions would lower 2008 cash earnings by about $100 million.
NAB shares were down 6%, or $1.42, at $22.30 but recovered to be off 4.3% at $22.70.
ANZ will report two days after the NAB on Thursday, October 23.
The NAB said in yesterday’s statement:
Three weeks ago, while markets were experiencing extreme levels of volatility and uncertainty, NAB decided to commence efforts to bring forward its September 2008 full year results announcement in order to provide the market with additional clarity on its financial position.
As a result of these efforts, NAB will complete its year end results for announcement on 21 October 2008.
Whilst the details of the full year results continue to be finalised, NAB is able to provide the following guidance to the market:
• Cash earnings will be around consensus, which NAB estimates to be approximately $3.9 billion.
• The Group will report strong capital and liquidity ratios, with Tier 1 clearly above 7%.
• The Group’s September 2008 final dividend per share is expected to match its March 2008 half year dividend per share.
• NAB intends to further strengthen its capital position having regard to ongoing global economic uncertainty. Consistent with this objective, the Group notes:
• The current Tier 1 ratio benefited from capital raised equal to the DRP shortfall on the Group’s first half dividend payment. The Group intends to continue this general strategy for the next two dividend payments; and
• The Group will continue to explore opportunities to utilise Tier 1 hybrid capacity.
The decision to bring forward the release of the 2008 full year results has been made in the interests of providing certainty to the market and does not foreshadow any proposed material announcement.
NAB said it intends to further strengthen its capital position due to the ongoing global economic uncertainty.
