Shares in the National Australia Bank (NAB) closed up nearly 2.5% after a better than expected profit rise for the September 30 year and a small, but surprising lift in final dividend.
The result was revealed before trading and the shares opened higher and stayed in the green all day, despite a half a per cent fall in the wider market.
Besides higher contributions from most divisions, a big reason for the size of the improvement was the sharp improvement in bad debts that was seen at the half year.
The NAB’s charge for bad and doubtful debts fell 40% to $2.26 billion and was helped by an improvement in the quality of its business lending book
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The Commonwealth experienced a similar lift from the improvement in bad and doubtful debts in its $6.1 billion cash profit for the year to June.
The ANZ reports its 2010 profit this morning before the market opens.
The shares rose more than 3%, or 83c, at one stage before settling to end at $25.26, up 2%, or 51c, as the shares lost some ground in afternoon trading.
Still it was better than the near 1% fall in the overall market.
NAB said it earned an annual net profit of $4.22 billion, up 63.2 % on $2.59 billion in the previous corresponding period.
But on the more acceptable cash profit basis, NAB’s 2010 profit was up a more sedate 16% to $4.58 billion, slightly better than market forecasts of $4.49 billion.
The bank’s second-half dividend of 78c was up from the 73c paid for the final half of 2009.
That made a full year payout of $1.52, up 6c from $1.46 a share for 2009. A share was slightly ahead of expectations of 76 cents.
Net interest margins, a key indicator of earnings increased 9 basis points to 2.25% over the year (2.16% in 2009), but fell slightly during the second half, (2.24% in the March half) pressured by a rise in funding costs.
The latest result shows revenue remains under pressure for the bank, although there were signs of an improvement in the second half.
Revenue dipped 1.6% to $16.6 billion was down 1.6 per cent on the year. ?????
Costs rose 3.7%, meaning a worsening in the cost to income ratio for the year to 46.2% in the September 2010 half, from 45.5% in the same half of 2009.
NAB is Australia’s largest business lender and has been hoping for a recovery in demand for loans to help generate profits.
Net interest margins, a key indicator of earnings, increased 9 basis points to 2.25% over the year, but fell slightly during the second half, pressured by a run-up in funding costs.
Profit for NAB’s business banking unit was up 37.1% on the year to $2.19 billion, although profit during the second half was flat.
NAB’s personal banking business saw its earnings drop 15.1% to $743 million, although its discounting strategy saw it increase market share in both mortgages and deposits.
Stronger contributions came from the UK banks and from the small regional rural bank in the US.
The UK banks lifted earnings 25.9% to $204 million. The Great Western Bank in the US lifted its contribution 26% to $US67 million.
NAB’s wealth management business increased earnings by 32.9% to $549 million, helped by contributions from recent acquisitions ranging from Aviva and JBWere.
The wealth management profit increase followed NAB last month being forced to abandon a $12 billion bid for AXA Asia Pacific due to regulatory opposition.
NAB said it "held $72 billion of liquid assets at 30 September 2010 to maintain flexibility and balance sheet strength.
"This significantly exceeds the amount specified by regulatory requirements.
"Term wholesale funding raised during the September 2010 year was $28.3 billion.
"The weighted average term to maturity of the funds raised in the September year was 5.1 years."
