NAB turns in $4 billion profit

cent national australia bank insurance wealth management business interest rates chief executive officer

11 November 2003
| By Craig Phillips |

National Australia Bank today recorded the highest ever net profit for an Australian bank following its announcement of a $3.96 billion net profit after significant items —a 17 per cent increase on last year’s performance.

Despite the announcement, NAB shares took a hammering in early trade falling as much as 70 per cent or 2.35 per cent and followed the bank’s prediction interest rates would rise in all the major economies it operates in —a move likely to impact on its mortgage lending businesses in these markets.

NAB’s wealth management business experienced a 28.1 per cent increase in its operating profit after tax, “reflecting continued strong growth in the insurance business and a recovery in investment earnings”.

The bank also generated cash earnings per share growth of 8.2 per cent in line with its full year forecast after absorbing significantly higher European pension costs and the impact of a stronger dollar.

As for NAB’s individual businesses,Financial Services Australia recorded a 12.5 growth in underlying profit, Financial Services Europe increased cash earnings by 6.5 per cent while Financial Services New Zealand boosted its cash earnings in local currency terms by 12.7 per cent.

NAB’s mortgage lending businesses all contributed to the group’s record performance and were up this year by 20 per cent in Australia, 9 per cent in Europe while its growth in market share of the New Zealand mortgage lending market rose to 15.6 per cent.

The bank also predicted a continued strengthening of the Australian dollar, but dismissed any dramatic impact it would have on the group’s ability to generate shareholder returns.

“The global recovery and increased commodity prices are also likely to mean a higher Australian dollar against both the US dollar and sterling. [However] in this economic and business environment, our growth strategies will continue to generate solid shareholder returns,” NAB chief executive officer Frank Cicutto says.

“In Australia, our business surveys show continued strength in housing, transport and business and financial services sectors. Manufacturing, agribusiness and tourism are also improving.”

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