The National Australia Bank (NAB) releases its full year figures this Thursday and while the earnings figure will generate headlines, that is not going to be the centre of attention.
After tax earnings will be lower because of losses incurred in the spin-off of its UK banks earlier in the year, but a higher result is expected on a cash earnings basis.
In fact if the NAB encounters the same headwinds as the Commonwealth did in its final half, it could see profits for the six months to September weaken, placing pressure on the expected dividend payout to shareholders of an unchanged 99 cents a share.
As it is cash profit excluding the impact of the spin off of the UK banks is forecast to rise 2% to $6.4 billion.
Attention will be focused on three areas – the dividend, the net interest margin and return on equity and the level of impaired loans and bad debts.
And some analysts will look more closely at the figures for non-performing or impaired housing loans to see whether they are spreading outside the mining states of WA, Queensland and the Northern territory.
The NAB paid a final of 99 cents last financial year and an interim this year of the same amount. Total dividend for 2014-15 was $1.98 and the question is, will the bank maintain that or be forced to follow the ANZ and reduce the payout to boost capital.
The bank’s net interest margin, cost to income ratio and its return on equity should all be higher given it shuffled off its weak UK banks in February and saw its key measures such as return on equity and the cost to income ratio improve.
But the bank saw its net interest margin under more pressure, and that won’t change give the rate cut in August.
The NAB reported an after-tax profit for 2014-15 of $6.3 billion, up by nearly 20% from a year ago.
But the preferred measure, cash earnings, saw a rise of nearly 16% to $5.8 billion as the bank was forced to boost provisions in its UK banks.
To raise more capital, the NAB also sold 80% of its life insurance business to Japanese insurer Nippon Life Insurance Company for $2.4 billion.
It has adjusted previous year’s figures to remove the UK banks and life insurance businesses to allow for accurate comparisons with the 2015-16 figures.
In May the bank reported a 6.5% rise in cash profit to $3.3 billion in the first half. The after tax result was a loss of $1.74 billion because of the losses sustained in the spin off of the UK banks.
Revenue rose 3.3% in the six months ended March 31 and bad debt charges fell 6% year-on-year, but were up7.4% on the September, 2015 half year.
Westpac said its first-half net fell nearly 45 to $3.9 billion, while ANZ said it was cutting its dividend as its interim cash earnings slumped 24% to $2.8 billion. The dividend was dropped to 80 cents a share from 86 cents. Some analysts are looking for the ANZ to trim its final next week, while others believe the other banks will drop their finals this year or the after the 2016-17 half year next May.
The CBA said cash profits grew 3% to $9.45 billion in the year to June, 30. But it declined by 3% over the second half to $4.6 billion, from $4.8 billion.
The Commonwealth held its final dividend flat at $2.22 per share, fully franked, taking the full-year dividend to a steady $4.20.
