5 May 2000
National Australia Bank expects to spend the next few months revamping its European banking operations, through expansion and a possible UK listing, and is ramping up its Internet activities with a dedicated e-commerce division.
The plans came as NAB yesterday posted a record interim net profit result of $1.57 billion for the March half, up 13.2 per cent and towards the upper end of market forecasts and the performance of its rivals. Interim dividend is a better than expected 59c fully franked, up from 54c.
Despite rising interest rates, chief executive Mr Frank Cicutto, said there were ``no dark clouds on the horizon" and the outlook was very positive.
But in a weak sharemarket, NAB fell 28.4c to $23.63. ABN Amro has selected it as one of its best buys with a $32 target.
While the bank's immediate priority is integrating the $4.56 billion MLC acquisition from Lend Lease, Mr Cicutto signalled a more aggressive focus on the Europe banking operations, including merger and acquisition opportunities, after the division posted an uneven performance and a slight profit fall.
``We can't stay as we are in the northern hemisphere and we look at opportunities all the time," Mr Cicutto said.
NAB is pursuing approval for a dual-listing structure which may aid its ambitions here.
He played down talk that NAB was looking to sell its US bank, Michigan National, which it plans to continue to develop.
Mr Cicutto also revealed an overhaul of corporate structure, including the streamlining of its corporate office.
The most important change here was the appointment of business and financial services general manager, Mr Glenn Barnes, to head a new development and e-commerce division to be called ``Nova". No consideration had been given to floating the division, which is not expected to include the Internet broking and banking operation and will be more concerned with identifying growth opportunities in areas such as e-procurement for small businesses.
``The management reshuffle is an intelligent move and evidence that management is addressing offshore strategic issues," said Warburg Dillon Read's analyst, Mr James Ellis.
In Australia, net profit rose 9.9 per cent to $788 million thanks to improved productivity and fewer doubtful debts, and represented 50.1 per cent of the total profit.
``We believe there are not any dark clouds on the horizon. In terms of asset quality, we are comfortable," Mr Cicutto said in response to the Reserve Bank's comments that Australia was experiencing unsustainable long-term credit growth.
``(Credit) growth has been very good in the last 12 months. We see it still continuing at a reasonable clip. We feel good about our potential for further asset growth in Australia. I see credit growth coming off as we go forward but it will be at a reasonable level to ensure there's satisfactory growth."
Loans and advances were up 10 per cent, while ``volume related increases in credit card and money transfer fees" helped boost the local result. During the March quarter the interest margin rose from 2.98 to 3.07 per cent as interest rates rose.
Across the group, doubtful debts fell $49 million to $260 million, reflecting lower provisioning in the US and in Asia.
The funds management's businesses, including County Investment Management bought in 1997, delivered stronger earnings, $53 million compared with $32 million previously.
Europe was dragged down by a flat performance at Clydesdale Bank in the UK and a reduced profit by National Irish Bank, which was hurt by increased competition.
US profits soared from $158 million to $265 milllion, thanks to solid results from Michigan National. The mortgage origination business Homeside felt the effects of a tough market where revenues fell, though NAB is working on improving its performance by migrating the business to other markets, including Australia.
And now for Europe
1998 1999 2000
Net profit ($) 658m 1.39bn 1.57bn
EPS (c) 67.3 93 99.3
Dividend (c) 49 54 59
March half-year
Get up to $600 in 1 hour with a Payday Loan!
To be eligible, you need to be employed for at least 3 months and earn at least $400 a week. If you think you qualify, then apply now or find out more.
* Please note, CashDoctors are currently unable to service Queensland residents.
