Friday saw a very mixed bag of interim reports and updates.
The most notable was the National Australia Bank which reported flat first-quarter cash earnings of $1.1 billion, drawing attention to the gap opening up between it and Westpac and the Commonwealth banks.
The ANZ is expected to provide its trading update shortly and then we will have a good idea of how the two Melbourne-based banking giants have fared against their larger Sydney-based peers.
The two Sydney based giants are doing better because they are stronger in home lending.
NAB shares ended trading down 70c, or 2.7%, at $25.25 as investors gave the result the thumbs down.
Westpac earned $1.6 billion in its first quarter, a record, and the CBA turned in a never before achieved cash interim profit of $2.9 billion.
NAB’s cash earnings of $1.1 billion were in-line with market expectations, but revenue and net interest margin were flat compared with improvements reported by Westpac and Commonwealth Bank.
The NAB said the first quarter profit was an increase of more than 20% on the fourth quarter of the 2009 financial year.
This included a contribution of $33 million from recent acquisitions.
The earnings improvement reflected a decline in the charge for bad and doubtful debts and sound business performance.
NAB chief executive Cameron Clyne told an analyst briefing that corporate loan demand, NAB’s main focus, was down and he did not expect it to rise during the year.
(Reserve Bank figures show business lending fell 7% over 2009.)
All banks reported lower corporate activity, but the CBA and Westpac had very solid home lending experiences.
Despite the weak corporate lending the NAB said it was concentrating on cementing its domination in the wealth management industry.
It bought insurer and funds manager Aviva last year, bought mortgage assets from smaller rival non-banks and launched a $13.3 billion counterbid for AXA Asia Pacific.
"Work to finalise our proposal to acquire the Australian and New Zealand Business of AXA APH is ongoing," Mr Clyne said, indicating the bank was getting ready for a drawn-out battle after AMP said a day earlier that it had room to improve its $11.6 billion bid.
NAB already has the backing of AXA’s independent directors for its bid, but the ACCC has raised concerns over an NAB-AXA alliance, tipping the scales towards rival bidder AMP.
AMP’s chief executive Craig Dunn said as circumstances changed the company had more flexibility with the bid. Its tie-up with AXA Asia Pacific’s parent for the bid has lapsed and AXA Asia Pacific has already rejected its offer.
The Australia Competition and Consumer Commission is expected to rule on both bids on March 17.
NAB shares have lagged the other three big Australian banks, falling 16% since end-September (the full year balance date), compared with a 2% fall for the market.
As expected, international surfwear group, Billabong International saw interim earnings off 15% hit by the rise in the value of the Australian dollar, but it reaffirmed its full year earnings guidance.
Net profit for the six months ended December 31, 2009 was $69.7 million, compared to $82.4 million in the previous corresponding half, the company revealed in Friday’s interim statement to the ASX.
The company cut dividend for the half by a third to 18c a share.
The result was down 7.6% in constant currency terms and down 15.4% in reported terms following a significant strengthening of the Australian dollar against the US dollar and the euro.
That was pointed out at the company’s AGM last year.
Reported group sales were $721 million, down 2.8% in constant currency terms, and 10.8% in reported terms compared to the prior corresponding period.
Billabong said the group generally performed in line with expectations in the half.
"Within key markets, trading in Australia was slightly ahead of expectation, Europe performed generally in line with forecasts and the US experienced patchy trade," the company said in the statement.
"Foreign exchange movements continued to buffet the business, particularly from a profit translation perspective, but the benefits from stronger product purchase hedge rates are expected to start to flow through to the business from late in the second half.
"Retail markets remain extremely volatile and difficult to predict, consumer spending patterns remain erratic and global economic concerns continue to weigh on general sentiment."
Billabong said that in constant currency terms, sales increased 2.6% in Europe, while sales in Australasia fell 1.4% and those in the Americas fell 6.2% from a year ago.
It said markets in South Africa, Japan and New Zealand are expected to remain soft, but with the balance of the region remaining steady.
The company declared an interim dividend of 18c per share, down from 27c in the previous corresponding period.
This was down from 27c in the previous half.
The company retained its earlier guidance of 5% growth in full year net profit in constant currency terms excluding the prior corresponding period’s impairment charge.
This translates into 10% growth when including this impairment charge for the year ending June 30, 2010 compared to the prior corresponding period.
The shares closed
