The National Australia Bank (NAB) will pay an unchanged final dividend of 99 cents a share after reporting a forecast 4% rise in cash earnings to $6.48 billion for the year to September.
The steady dividend means the full year payout is also unchanged at $1.98 a share, meaning the bank and its board do not see much prospect of an earnings surge in the new financial year.
On a statutory basis, net profit for the year was $352 million, down 94.4% reflecting the loss on sale for both CYBG and 80% of NAB Wealth’s life insurance business. Excluding discontinued operations, statutory net profit fell 5.6% to $6.42 billion.
The bank said the main difference between statutory and cash earnings over the year relates to discontinued operations (demerger and IPO of CYBG and sale of 80% of NAB Wealth’s life insurance business), distributions and the effects of fair value and hedge ineffectiveness.
Revenue rose 2.5%. Excluding gains in the March 2015 half year from a legal settlement and the UK Commercial Real Estate loan portfolio sale and SGA asset sales, revenue rose approximately 3.7%, benefitting from higher lending balances and stronger Markets and Treasury income, directors said. Group net interest margin (NIM) fell 2 basis points to $1.88 (from $1.90) “mainly due to higher funding costs." Bad debts rose, the NAB saying in this morning’s release that the charge for bad and doubtful debts rose 7.0% to $800 million. “The increase primarily reflects higher specific charges relating to the impairment of a small number of large single name exposures in Australian Banking,” directors said.
And the bank also said that the ratio of Group 90+ days past due and gross impaired assets to gross loans and acceptances of 0.85% at 30 September 2016 was 7 basis points higher compared to 31 March 2016 “mainly reflecting increased impairment of New Zealand dairy exposures of which the majority are currently classified as no loss based on collective provisions and security held.”
“This has been a milestone year for the Group with the completion of major divestments including our exit from CYBG and the sale of 80% of our life insurance business to Nippon Life. NAB moves into 2017 a reshaped business – stronger, simpler and focused on helping our customers in Australia and New Zealand,” NAB Group CEO Andrew Thorburn said in this morning’s statement.
“These changes have been achieved while delivering an improved operating performance and maintaining a strong balance sheet, sound asset quality and tight control of costs. This is against a backdrop of favourable Australian and New Zealand economic conditions, but also rising funding costs and global uncertainty.
“Improving momentum and stabilising margins in Business Banking have been particularly pleasing, with lending and revenue growth focused on higher returning priority segments. In Personal Banking, we made good progress in restoring home loan volume growth back to system levels after a period of significant change in pricing and credit policies,“ he added.
