Wealth management undermines NAB result

National Australia Bank (NAB) has reported a 9.4 per cent fall in cash earnings for the half-year to March, with its wealth management division, MLC, reporting a 28.2 per cent decline in cash earnings to $158 million and lower revenue from advice.

In an announcement released on the Australian Securities Exchange today, NAB said its cash earnings had fallen by 9.4 per cent to $2 billion, reflecting tough market conditions that had deteriorated further during the half-year to March.

It said the fall in cash earnings was largely due to increased charges for bad and doubtful debts and higher funding costs. Statutory profit had decreased marginally to $2.7 billion.

Looking at MLC, the banking group said substantially weaker investment markets had been the main factor in the 28.2 per cent decline, with net income falling by 16.6 per cent to $539 million.

The company said cash earnings before interest on retained earnings for MLC investments declined by 45.6 per cent to $68 million, with the net income declining by 21.4 per cent to $335 million due to lower management fees as a result of the 22 per cent fall in funds under management and lower revenue from advice due to weak market conditions.

However, like a number of other major financial services houses, MLC reported strong insurance sales, with annual inforce premiums up 10.8 per cent albeit that cash earnings declined by 5.3 per cent.

Commenting on the result, NAB group chief executive Cameron Clyne said the fall in cash earnings reflected the tough economic conditions that continued to deteriorate as the half-year progressed.

“We continued to grow revenue while carefully managing costs, but this was offset by increased bad and doubtful debts and higher funding costs,” he said.