NAB profits hit by wealth write-down

National Australia Bank (NAB)has reported a $205 million write-down of its $6.5 billion wealth management business due to the continued lacklustre performance of global equity markets.

The group’s 2003 half year results revealed a net loss of $44 million over the period, after a $161 million operating profit became a loss due to the write-down.

The result had a significant impact on the bank’s first half profit, which was down 17 per cent.

NAB chief executive Frank Cicutto says the operating conditions of the business have been extremely challenging, primarily due to the poor performance of equities and subsequent weaker market sentiment.

Languishing equity markets caused NAB’s Australian total funds under management (FUM) to decline from $65.6 billion in September 2002 to $65.1 billion in March 2003.

Cicutto says the depreciation impacted on the group’s retail FUM market share, though last week’sAssirtMarket Share Report put NAB/MLCin second place behind the Commonwealth/Colonial First StateGroup.

A decline in operating profits form non-life wealth management businesses was blamed on $11 million spent on compliance related projects in the lead up to the implementation of the Financial Services Reform Act.

Despite the write-down, the business has continued to invest in the sector with $13 million after tax reported as expenditure to fund strategic investment programs in both Australia and the UK.

“We have continued to invest in wealth management in all regions, because of our confidence in our differentiated position and the long-term strategic opportunities in the industry,” Cicutto says.

Planned life-company margins decreased for the half-year period, reflecting reduced fee revenue as a result of lower FUM within the investments business.

Cicutto says that the Australian risk insurance business continues to maintain its market leading position, having increased to a 16.8 per cent market share for the 12 months ended 30 September 2002 according to Dexx&r.