FILE NO 1-9945
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June 2005
National Australia Bank Limited
ACN 004 044 937
(Registrant’s Name)
Level 24
500 Bourke Street
MELBOURNE VICTORIA 3000
AUSTRALIA
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
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Form 20-F ý |
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Form 40-F o |
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Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
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Yes o |
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No ý |
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If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82
Searchable text section of graphics shown above
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Slides |
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[LOGO]
2
Cash earnings $1,618m
Cash earnings before significant items
[CHART]
Earnings have bottomed
Dividend maintained at 83cps (80% franked)
3
Group overview
Key actions during the half:
• Stabilising the business and protecting the franchise
• Addressing expense growth
• Progress on risk and regulatory agenda
Work in progress:
• Business efficiency
• Reshaping the business
• Shedding low-yielding assets and funding mix
• Capital management and improving ROE
…but only one year into a two to three year turnaround
4
Drivers of the Group result
• Stronger volumes largely offset by margin decline
• Markets and Structured products income restored
• Wealth Management steady
• Expense growth arrested
• Loan loss provision maintained
5
Group performance
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Change on Sep 04 HY |
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Mar 05 |
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Sep 04 |
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% |
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% |
|
|
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HY |
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HY |
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Group |
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Ongoing^ |
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$m |
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$m |
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Banking |
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Net interest income |
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3,549 |
|
3,603 |
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(1.5 |
) |
0.5 |
|
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Other operating income* |
|
2,110 |
|
2,042 |
|
3.3 |
|
5.5 |
|
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Banking Net Income |
|
5,659 |
|
5,645 |
|
0.2 |
|
2.3 |
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Banking operating expenses* |
|
(3,246 |
) |
(3,222 |
) |
(0.7 |
) |
(4.0 |
) |
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Underlying profit |
|
2,413 |
|
2,423 |
|
(0.4 |
) |
0.3 |
|
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Charge to provide for doubtful debts |
|
(281 |
) |
(254 |
) |
(10.6 |
) |
(12.2 |
) |
|
Banking income tax expense |
|
(648 |
) |
(619 |
) |
(4.7 |
) |
(5.6 |
) |
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Banking cash earnings |
|
1,484 |
|
1,550 |
|
(4.3 |
) |
(3.8 |
) |
|
Wealth Management cash earnings |
|
229 |
|
158 |
|
44.9 |
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44.7 |
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|
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|
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Cash earnings ** |
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1,618 |
|
1,611 |
|
0.4 |
|
1.0 |
|
* Before inter-divisional eliminations
** Before significant items and after outside equity interest
^ Excludes Irish Banks, UK National Custodian Services and National Australia Life Company
7
March 2005 cash earnings by division
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Mar 05 |
|
Sep 04 |
|
Sep 04 |
|
Change on |
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Change on |
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|
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$m |
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$m |
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$m |
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% |
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% |
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Australian Banking |
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951 |
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940 |
|
940 |
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1.2 |
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1.2 |
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Wealth Management Australia*+ |
|
194 |
|
149 |
|
189 |
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30.2 |
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2.6 |
|
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Total Australia |
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1,145 |
|
1,089 |
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1,129 |
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5.1 |
|
1.4 |
|
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Total UK |
|
297 |
|
287 |
|
287 |
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3.5 |
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3.5 |
|
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Total New Zealand |
|
163 |
|
143 |
|
143 |
|
14.0 |
|
14.0 |
|
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Institutional Markets & Services+ |
|
308 |
|
217 |
|
244 |
|
41.9 |
|
26.2 |
|
|
Other (incl Group Funding & Corporate Centre) |
|
(200 |
) |
(32 |
) |
(32 |
) |
large |
|
large |
|
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Distributions |
|
(95 |
) |
(93 |
) |
(93 |
) |
(2.2 |
) |
(2.2 |
) |
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Cash earnings before significant items |
|
1,618 |
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1,611 |
|
1,678 |
|
0.4 |
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(3.6 |
) |
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Significant items after tax |
|
821 |
|
(511 |
) |
(511 |
) |
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|
* Includes Asian operations
+ Cash earnings after outside equity interest
8
Banking net interest income reflects strong volume growth partly offset by margin decline
[CHART]
^ Includes Irish Banks and UK National Custodian Services
9
Quarterly volume growth for the last 2 halves
Group Lending Growth*^
(quarterly average)
[CHART]
Retail Deposit Growth*
(quarterly average)
[CHART]
* At constant exchange rates
^ Excludes Irish Banks and UK National Custodian Services
+ Excludes securitisation
10
Net interest margin^ March 2005 down 7bps on the September 2004 half
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Sep 04 HY |
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NIM |
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Mar 05 HY+ |
|
AIEA |
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% of Group |
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Group NIM |
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NIM |
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Contraction |
|
NIM |
|
Mar 05 HY |
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Sep 04 HY |
|
Mar 05 HY |
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Contraction |
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$Bn |
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Australian Banking |
|
2.56 |
% |
(9 |
)bps |
2.47 |
% |
150 |
|
48 |
% |
48 |
% |
(4 |
)bps |
|
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|
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|
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|
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|
UK Banking+ |
|
4.10 |
% |
(20 |
)bps |
3.90 |
% |
41 |
|
14 |
% |
13 |
% |
(2 |
)bps |
|
|
|
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|
New Zealand Banking |
|
2.62 |
% |
(5 |
)bps |
2.57 |
% |
31 |
|
10 |
% |
10 |
% |
— |
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Institutional Markets & Services |
|
0.41 |
% |
(2 |
)bps |
0.39 |
% |
140 |
|
44 |
% |
45 |
% |
(1 |
)bp |
|
|
|
|
|
|
|
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|
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|
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|
|
|
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Other |
|
(0.11 |
)% |
(10 |
)bps |
(0.21 |
)% |
(50 |
) |
(16 |
)% |
(16 |
)% |
1 |
bp |
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Sub Total |
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2.23 |
% |
|
|
2.16 |
% |
312 |
|
100 |
% |
100 |
% |
(6 |
)bps |
|
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Change in Divisional Mix* |
|
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(1 |
)bp |
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Group Impact |
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|
(7 |
)bps |
^ Excludes Irish Banks and UK National Custodian Services
+ Excludes changes to internal capital allocations
* In the Results Announcement this is allocated across the Divisional contributions to Group NIM contraction
11
Banking other operating income* up $121m in the March 2005 half
[CHART]
* Before significant items, disposed operations and exchange rate effects
+ Normalised for impact of sale of Irish Banks and UK National Custodian Services
12
Banking expenses* increased $113m in the March 2005 half
[CHART]
* Before significant items, disposed operations and exchange rate effects
+ Normalised for impact of sale of Irish Banks and UK National Custodian Services
13
Australia cash earnings* up 1.4%^ on the September 2004 half
|
|
|
Mar 05 |
|
Sep 04 |
|
Change on |
|
Change on |
|
|
|
|
$m |
|
$m |
|
% |
|
% |
|
|
Australian Banking |
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
1,888 |
|
1,834 |
|
2.9 |
|
1.1 |
|
|
Other operating income |
|
1,081 |
|
1,073 |
|
0.7 |
|
3.1 |
|
|
Total income |
|
2,969 |
|
2,907 |
|
2.1 |
|
1.8 |
|
|
Other operating expenses |
|
(1,479 |
) |
(1,465 |
) |
(1.0 |
) |
(13.2 |
) |
|
Underlying profit |
|
1,490 |
|
1,442 |
|
3.3 |
|
(7.5 |
) |
|
Charge to provide for doubtful debts |
|
(130 |
) |
(97 |
) |
(34.0 |
) |
(25.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Australian Banking cash earnings |
|
951 |
|
940 |
|
1.2 |
|
(9.7 |
) |
|
Wealth Management Australia cash earnings+^ |
|
194 |
|
189 |
|
2.6 |
|
13.5 |
|
|
Total Australia cash earnings+ |
|
1,145 |
|
1,129 |
|
1.4 |
|
(6.5 |
) |
* Before significant items
^ Adjusted for $40M prior year adjustment in Wealth Management Australia
+ Includes Asian operations
15
Australian Banking net interest income up 2.9% during the half
Volume Growth
(quarterly average)
[CHART]
Net Interest Margin
[CHART]
16
Australian Banking: state of the franchise
|
Market share |
|
Mar 05 |
|
Dec 04 |
|
Sep 04 |
|
Jun 04 |
|
Mar 04 |
|
Rank at |
|
|
Business Lending (incl Bills^)+ |
|
22.9 |
% |
22.1 |
% |
21.6 |
% |
22.0 |
% |
22.0 |
% |
#1 |
|
|
Housing (incl Securitisation) |
|
16.8 |
% |
16.7 |
% |
16.7 |
% |
17.0 |
% |
17.2 |
% |
#2 |
|
|
Credit Cards |
|
16.3 |
% |
16.6 |
% |
16.7 |
% |
17.0 |
% |
17.8 |
% |
#4 |
|
|
Business Deposits |
|
26.7 |
% |
26.7 |
% |
27.8 |
% |
27.4 |
% |
27.7 |
% |
#1 |
|
|
Household Deposits |
|
13.3 |
% |
13.3 |
% |
13.4 |
% |
13.4 |
% |
13.6 |
% |
#3 |
|
Initiatives undertaken
• New products launched
• Restoring credit risk settings
• Freeing up processes
• Service
+ Includes Institutional Markets & Services
^ Excludes Bank Held Bills
* Ranking among authorised banks
Source: APRA Monthly Banking Statistics / National (March 2005)
17
Wealth Management Australia+ underlying cash earnings* up 2.6% in the March 2005 half
|
|
|
Mar 05 |
|
Sep 04 |
|
Change on |
|
||
|
HY |
|
HY |
|
Sep 04 HY |
|
Mar 04 HY |
|||
|
|
|
$m |
|
$m |
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
115 |
|
106 |
|
8.5 |
|
23.7 |
|
|
Insurance |
|
74 |
|
82 |
|
(9.8 |
) |
(10.8 |
) |
|
Other (incl. regulatory programs) |
|
(42 |
) |
(26 |
) |
(61.5 |
) |
(13.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Profit from operations (after tax) |
|
147 |
|
162 |
|
(9.3 |
) |
5.8 |
|
|
Investment earnings shareholders’ retained profits & capital from life business (IORE) |
|
47 |
|
27 |
|
74.1 |
|
11.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying operating profit after tax & OEI |
|
194 |
|
189 |
|
2.6 |
|
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior year adjustments |
|
— |
|
(40 |
) |
large |
|
large |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash earnings* |
|
194 |
|
149 |
|
30.2 |
|
13.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation profit/ (loss) after tax |
|
51 |
|
(132 |
) |
large |
|
(65.5 |
) |
+ Includes Asian operations
* Before significant items
18
UK ongoing operations^ cash earnings* up 12.8% on the September 2004 half
|
|
|
Half year to |
|
Change on |
|
||||
|
|
|
Mar 05 |
|
Sep 04 |
|
Sep 04 |
|
Mar 04 |
|
|
|
|
£m |
|
£m |
|
HY % |
|
HY % |
|
|
Net interest income |
|
334 |
|
333 |
|
0.3 |
|
(3.2 |
) |
|
Other operating income |
|
183 |
|
166 |
|
10.2 |
|
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
517 |
|
499 |
|
3.6 |
|
(0.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
(330 |
) |
(325 |
) |
(1.5 |
) |
(4.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Underlying profit |
|
187 |
|
174 |
|
7.5 |
|
(8.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Charge to provide for doubtful debts |
|
(35 |
) |
(45 |
) |
22.2 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
UK ongoing operations^ |
|
106 |
|
94 |
|
12.8 |
|
(10.2 |
) |
|
Ireland |
|
15 |
|
22 |
|
(31.8 |
) |
(28.6 |
) |
|
Custody |
|
— |
|
(3 |
) |
large |
|
large |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UK cash earnings* |
|
121 |
|
113 |
|
7.1 |
|
(10.4 |
) |
Volume Growth
(quarterly average)
[CHART]
^ Excludes Irish Banks, UK National Custodian Services and National Australia Life Company
* Before significant items
19
UK ongoing operations^ underlying net interest margin down 20bps in the March 2005 half
[CHART]
^ Excludes Irish Banks, UK National Custodian Services and National Australia Life Company
20
Irish assets sold and operations simplified
Sale of Irish banks announced December 2004
• Completed 28 February 2005
• Sold for $2.5bn
• Profit on sale of $1.1bn
UK Custody business and Life business sold
Legal entity merger of Clydesdale and Yorkshire completed December 2004
21
Progress on UK strategy
• Efficiency programme commenced
• New distribution channels developing
• Customer attrition slowing
Net Personal Customer Number Movement in UK
[CHART]
22
New Zealand cash earnings* up 9.3% on the September 2004 half
|
|
|
Mar 05 |
|
Sep 04 |
|
Change on |
|
||
|
Sep 04 |
|
Mar 04 |
|||||||
|
Net interest income |
|
420 |
|
415 |
|
1.2 |
|
6.3 |
|
|
Other operating income |
|
219 |
|
226 |
|
(3.1 |
) |
(3.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
639 |
|
641 |
|
(0.3 |
) |
2.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
(366 |
) |
(380 |
) |
3.7 |
|
(10.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Underlying profit |
|
273 |
|
261 |
|
4.6 |
|
(6.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Charge to provide for doubtful debts |
|
(13 |
) |
(9 |
) |
(44.4 |
) |
13.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash earnings* |
|
176 |
|
161 |
|
9.3 |
|
(5.9 |
) |
Volume Growth
(quarterly average)
[CHART]
*Before significant items
23
New Zealand Banking: state of the franchise
|
Market share * |
|
Mar 05 |
|
Sep 04 |
|
Mar 04 |
|
Rank at Mar 05 |
|
|
Housing |
|
16.2 |
% |
15.9 |
% |
15.7 |
% |
#4 |
|
|
Cards (outstandings) |
|
30.8 |
% |
30.5 |
% |
31.2 |
% |
#1 |
|
|
Agribusiness |
|
17.8 |
% |
17.5 |
% |
18.5 |
% |
#2 |
|
|
Retail Deposits |
|
18.7 |
% |
18.3 |
% |
18.7 |
% |
#3 |
|
Satisfaction with branch service^
Based on main bank customers who have visited a branch
(Margin of error for BNZ = +/- 5%)
[CHART]
Satisfaction with Main Bank - Personal Market^
“How would you rate your main provider of financial services on its overall service?”
(Margin of error for BNZ = +/- 5%)
[CHART]
* Source RBNZ
^ Source: AC Neilsen
25
Institutional Markets & Services cash earnings* up 29.1%^ on the September 2004 half
|
|
|
Mar 05 |
|
Sep 04 Adj |
|
% Change on |
|
||
|
Sep 04 Adj |
|
Mar 04 HY |
|||||||
|
|
|
$m |
|
$m |
|
|
|
|
|
|
Net interest income |
|
281 |
|
312 |
|
(8.0 |
) |
(18.9 |
) |
|
Other operating income |
|
486 |
|
354 |
|
39.8 |
|
(5.7 |
) |
|
Total income |
|
767 |
|
666 |
|
17.4 |
|
(11.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
(366 |
) |
(368 |
) |
(1.9 |
) |
(8.0 |
) |
|
Underlying profit |
|
401 |
|
298 |
|
36.6 |
|
(23.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash earnings* |
|
308 |
|
244 |
|
29.1 |
|
(10.6 |
) |
Total Income up 17.4%^
[CHART]
* Before significant items and after outside equity interest
^ At constant exchange rates and adjusted for prior half capitalised interest reversal
26
IMS moving to improve returns
IMS Income contribution and capital usage
As at 30 Sep 2004
[CHART]
• Improve returns on non-core low yield assets
• Focus on key segments across core markets - consolidation of Asian footprint
• Greater emphasis on origination and distribution / on-selling positions
• Progress to date – Reduction of $5bn of risk weighted assets releasing approx $0.25bn of ACE capital
27
IMS - Franchise performance and operating environment
Franchise position mixed
Declining share / league table position in:
• FX markets, bond origination, securitisation and lead relationships position down from 21% in ’03 to 18% ‘04
Stable or improving position in:
• Loan syndications position #1 to 31 March ‘05, interest rate derivatives share stable over past year
Operating environment and outlook
• Strong market liquidity continues to put pressure on corporate lending yields
• UK tax law changes impacting Structured Finance business
• Expecting flat performance in second half
• Earnings to rebase, impacting 2006
Source: Peter Lee & Associates/ Insto/ Bloomberg 2005
28
Provisioning coverage levels have increased
Provision Coverage Ratios
[CHART]
General Provisions to Risk-Weighted Assets (Excluding Housing)
[CHART]
30
Portfolio remains sound with write-off levels down and key quality indicators improving
Total Net Write-offs to Risk-Weighted Assets (excl Housing)
[CHART]
Fully Secured lending % of Total Balance*
[CHART]
CRS 1-6* % of Total Balance
[CHART]
* Excludes Housing and all Personal Loans
31
Non-accrual levels stable
Gross Non-Accrual Loans
[CHART]
90+ Delinquency and Gross 12 Month Rolling
Write Off Rates Total Personal Lending
[CHART]
32
Capital above target ranges
[CHART]
Surplus capital position reflects:
• Sale of Irish Banks
• New tier 1 hybrid
Surplus provides flexibility to cater for:
• Uncertainty of AIFRS
• Revised APRA rules on hybrid capital
|
Targets |
|
Target Ranges |
|
31 Mar 05 |
|
|
|
|
(%) |
|
|
|
|
ACE/RWA |
|
4.75 – 5.25 |
|
5.84 |
|
|
Tier 1 |
|
7.00 – 7.50 |
|
8.30 |
|
|
Total Regulatory |
|
10.00 – 10.50 |
|
11.37 |
|
34
A full capital management agenda
• Reduction in capital ratios cannot be considered until a range of uncertainties are dealt with
• APRA discussion paper on tier 1 hybrids imminent, and impact of AIFRS to be finalised
• Based on APRA AIFRS discussion paper, the pro forma ACE and total capital impact is estimated at 60 bps reduction; and tier 1 impact of 113 bps
• Flexibility obtained to buyback the National Income Securities at last AGM
• Further restructuring charges at Sep 05 will impact capital
• Return to internal model for market risk-weighted assets would free up around 16 basis points in ACE
* Is not deducted from ACE.
35
Core capital generation supports asset growth and dividend
Movement in ACE Ratio
|
Core items (-3 bps) |
|
Non-core items +57 bps |
|
|
|
|
|
[CHART] |
|
[CHART] |
36
Dividend of 83 cents consistent with guidance
Dividend Growth
[CHART]
Current half
• Payout ratio of 80%
• Franking of 80%
37
Restructuring charges for March 2005 half
|
|
|
Total Charge |
|
FTE |
|
Direct |
|
Related |
|
|
|
|
Booked |
|
Reduction |
|
Savings |
|
Savings |
|
|
|
|
$m |
|
# |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia+ |
|
126 |
|
1,000 |
|
80 |
|
|
|
|
UK |
|
266 |
|
1,700 |
|
174 |
|
112 |
|
|
New Zealand |
|
1 |
|
— |
|
1 |
|
|
|
|
Institutional Markets & Services |
|
10 |
|
— |
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
403 |
|
2,700 |
|
263 |
|
112 |
|
+ Includes Australia Region and Corporate Centre
38
Restructuring in September 2005 half
• Australia and Institutional Markets & Services restructuring plans being finalised
• A restructuring charge up to circa $400M (pre tax) to be booked in September 2005 half
• Further redundancies of up to 1,500 to be announced in September 2005 half
• Ongoing cash spend on investments expected to be maintained broadly at current levels
• Further details to be provided in September 2005 strategy briefing
39
Drivers of the Group result
• Stronger volumes largely offset by margin decline
• Markets and Structured products income restored
• Wealth Management steady
• Expense growth arrested
• Loan loss provision maintained
40
Issues identified in November result briefing
|
1. People and Culture |
|
2. Regulatory & Compliance |
|
|
|
|
|
3. Business Inefficiency |
|
4. Stalled Revenue |
|
|
|
|
|
• Complexity |
|
• Inward looking |
|
• Bureaucratic |
|
• Business processes not customer focused |
42
Cultural change
Creating the conditions for transformation
• Clear view of where we are and want to be
• Talented new leadership
• Corporate principles
Effective feedback and monitoring
43
Risk and Compliance
Good progress on APRA remedial actions
Other regulatory issues also progressing
• Investor compensation complete
• Good progress on enforceable undertakings
But issues still emerging
2 to 3 year program to strengthen Finance and Risk functions commenced
44
United Kingdom
Reconfiguring distribution
• Expanding IFS sites and creating 50 flagship branches
• Closing 60 Clydesdale and 40 Yorkshire branches
Efficiency program targeting £117m in annualised savings
Third party distribution on track to write £800m in new mortgages
Back book repricing and expense pressures to continue
Second half outlook flat
45
New Zealand
Growing share in housing and youth markets
NZ market remains competitive
Focus on improving the customer proposition to continue
Efficiency gains to support reinvestment in business
46
Australia
New leadership team and operating model
• Distribution and product focus
• Greater P&L accountability
Expense growth contained with FTEs down by 350 in the first half
On the spot loans
• Improving approval times
• Writing more business
• Efficiency gains
47
Tightening risk settings (November 2004)
Housing Lending - Australia
Annual Growth Rates (%)
[CHART]
48
Regaining share over last quarter
Housing Lending - Australia
National’s Multiple of Financial System Growth
[CHART]
50
Australia – Wealth Management
Integration progressing well
Very competitive marketplace
Focus on improving cross sell
51
Australian region
Still a long way to go to achieve;
• Robust risk and compliance framework
• Containing margin reduction
• Sustainable cost saves
• Sustainable revenue growth
Strategy presentation later in the year
52
Institutional Markets and Services
Shifting focus to rebasing and rebuilding
FX desk reopened
Focusing on improving ROE
Consolidating Asian footprint
Releasing capital will impact interest income
Medium term outlook subdued
53
Streamlining and efficiency
Streamline the Corporate Centre
• 1000 FTEs to approx. 200 FTEs
Restructuring announcements
• First half provisioning charge booked
• Reduction of up to 4,200 FTE’s group wide
• Consolidating IMS business in Asia
54
Rebuilding the National
|
|
|
UK & |
New |
|
|||||
|
|
IMS |
Australia |
Zealand |
|
|||||
|
|
|
|
|
|
|||||
|
|
|||||||||
|
|
|
|
|
||||||
|
In Decline |
Stabilising |
Rebuilding |
Truly Competitive |
||||||
|
|
|
Capability |
|
||||||
Challenges as we enter the rebuilding phase
• Maintaining business momentum and morale while restructuring
• Fixing risk and control weaknesses while reducing costs
• IMS rebasing
• Increasingly competitive environment
• Ongoing investment requirements
55
Summary and outlook
Earnings have bottomed but remain well down on peak levels
Turnaround timeframe remains 2 to 3 years
Expect acceptable earnings growth – consistent with recovery process
Expect to maintain 83c dividend in second half franked between 80 and 100%
56
|
HALF YEAR RESULTS 05 |
|
[LOGO] |
This section contains forward looking statements. Refer to disclaimer on page 76
[LOGO]
57
Australian housing cycle remains mild supported by owner occupier
House prices and finance approvals
[CHART]
• Housing inflation peaked early 2004
• Prices generally moving sideways
• Rise in owner occupier volumes offsetting fall amongst investment housing
• Expect housing credit growth to remain moderate
58
NZ housing cycle resilient but coming off its highs
House prices and sales
[CHART]
• Housing inflation peaked in 03/04
• Price growth still high but expected to slow further
• Housing sales stabilise at lower level
• Volumes continue to moderate from historical highs
• Credit growth to moderate
59
UK housing cycle slowing
House prices & finance approvals
[CHART]
• House price inflation easing
• Housing volumes declining
• Credit growth has slowed but expected to remain moderate
60
Economic environment outlook
Business conditions expected to remain relatively favourable across the Group:
• Overall sustained income and credit growth, albeit at a bit slower. Slightly higher unemployment & inflation. Monetary conditions remain about “neutral”.
• GDP growth is forecast to be 2% in Australia, 2.75% in the UK and 3% in New Zealand in the 2004/05 bank year.
• In Australia, some moderation in domestic activity (largely household spending) offset by a pick up in exports.
• In NZ, domestic conditions are forecast to moderate significantly during the next year due to tighter financial conditions & slower immigration.
• In the UK, business activity is expected to ease back to trend reflecting some moderation in household spending & external demand.
61
Economic
Environment…
Sustained growth & low unemployment
Economic Growth & Unemployment
|
Australia |
|
New Zealand |
|
|
|
|
|
[CHART] |
|
[CHART] |
|
|
|
|
|
UK |
|
Group - Asset Wtg |
|
|
|
|
|
[CHART] |
|
[CHART] |
62
Economic Environment…
Credit growth to moderate slightly
Credit Growth
|
Australia |
|
New Zealand |
|
|
|
|
|
[CHART] |
|
[CHART] |
|
|
|
|
|
UK |
|
Group - Asset Wtg |
|
|
|
|
|
[CHART] |
|
[CHART] |
63
Macro Risks
• Geo politics - Both political, oil & trade tensions overhang the outlook.
• Unbalanced global growth – Much still depends on the US & Asia. Continental Europe continues to lag.
• Australia, New Zealand and UK household leverage – Increased household gearing, low savings and “expensive” housing leaves some consumers vulnerable to higher interest rates & sustained loss of jobs.
• Financial instability – As interest rates rise to more “normal” levels, some asset valuations may become volatile & lead to instability amongst investors and institutions.
• Oil prices - Sustained high prices would prove a headwind to the global recovery under way.
64
Wealth revaluation profit reflects changes in economic assumptions
[CHART]
|
Revaluation profit before tax: |
|
$ |
54m |
|
|
|
|
|
|
|
|
Tax (incl. Impact of tax consol’n) |
|
$ |
3m |
|
|
|
|
|
|
|
|
Revaluation profit after tax |
|
$ |
51m |
|
|
Changes in |
• |
Change in economic assumptions |
|
Assumptions & |
• |
Lower margins for retail products |
|
Experience |
• |
Higher investment earnings generating higher FUM |
|
|
• |
Continued robust cost containment |
67
Wealth Management Australia – market share
Master Fund Market Share plus Flows
[CHART]
Insurance - Retail Risk Market Share
[CHART]
68
Wealth Management Australia – inflows and attrition
Share of annual inflows
[CHART]
Attrition rate
[CHART]
69
Taxation
|
|
|
Received |
|
Potential |
|
||
|
NZ Structured Finance deals |
|
NZ$ |
68M |
+ |
NZ$ |
369M |
* |
|
|
|
|
|
|
|
||
|
ExCaps capital raising |
|
$ |
552M |
|
$ |
2M |
* |
|
|
|
|
|
|
|
||
|
TrUEPrS capital raising |
|
$ |
150M |
|
$ |
20M |
* |
• Further ExCaps Assessments received (as announced 5 May 2005)
• No provisions have been raised – no change to Group’s position
• Matters progressing through normal review and appeal processes
• Group will continue to monitor any relevant developments
* Based on primary tax only; interest and penalties may also apply
+ Includes NZ$21 million interest
70
Project / investment spend - IFRS and Basel II
|
IFRS Project ($m) |
|
Global/ |
|
Wealth |
|
Europe |
|
NZ |
|
Total |
|
|
Enabling Infrastructure |
|
35 |
|
2 |
|
7 |
|
— |
|
44 |
|
|
Process Automation |
|
12 |
|
— |
|
4 |
|
2 |
|
18 |
|
|
Compliance Delivery |
|
34 |
|
12 |
|
20 |
|
4 |
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Budget |
|
81 |
|
14 |
|
31 |
|
6 |
|
132 |
|
|
Operational Expense |
|
|
|
|
|
|
|
|
|
102 |
|
|
Capital Budget |
|
|
|
|
|
|
|
|
|
30 |
|
|
Cash spend to date |
|
|
|
|
|
|
|
|
|
93 |
|
|
Estimated Completion |
|
|
|
|
|
|
|
|
|
Dec 05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basel II Project ($m) |
|
Global/ |
|
Wealth |
|
Europe |
|
NZ |
|
Total |
|
|
Enabling Infrastructure |
|
11 |
|
— |
|
33 |
|
1 |
|
45 |
|
|
Process Automation |
|
56 |
|
1 |
|
27 |
|
9 |
|
93 |
|
|
Compliance Delivery |
|
56 |
|
2 |
|
12 |
|
2 |
|
72 |
|
|
Total Cash Budget |
|
123 |
|
3 |
|
72 |
|
12 |
|
210 |
|
|
Operational Expense |
|
|
|
|
|
|
|
|
|
138 |
|
|
Capital Budget |
|
|
|
|
|
|
|
|
|
72 |
|
|
Cash spend to date |
|
|
|
|
|
|
|
|
|
116 |
|
|
Estimated Completion |
|
|
|
|
|
|
|
|
|
Jun 06 |
|
71
Major impacts upon transition to AIFRS
• Recognition of net defined benefit pension deficit
• Replacement of EMVONA with acquired goodwill
• Additional volatility in income and equity reserves from fair value measurement
• Recognition of share based payments expense
• Expected decrease in general loan loss provision
• Balance sheet grossed up by consolidation of SPEs
• Regulatory capital implications under discussion with APRA
72
Current status: AIFRS program on-target to meet 1 October 2005 compliance timeline
Achievements as at April 2005
• Identification of of impacts and requirements completed
• AIFRS Accounting Policies relating to the 2004/05 transitional year formulated and approved, well advanced with AASB 132/139 policies
• 1 October 2004 AIFRS Equity Reconciliation and Opening Balance Sheet well progressed
• Design of AASB 132/139 related impacts (Hedging, Valuation, Provisioning) complete, well advanced with build and testing activities
• Proof of concept of Hedge Accounting solution successfully demonstrated
• Briefing sessions on customer impacts with bankers completed
Upcoming Milestones
• Remaining AIFRS Accounting Policies formulated and approved
• AASB 132/139 system build completed
• AASB 132/139 testing, parallel run, cut-over and implementation completed
• 1 October 2005 Transitional Adjustments completed on time
• Application of tax effect accounting completed
• Transition to Business As Usual
73
UK Restructuring will deliver £117m run rate benefits by September 2007
|
|
|
Restructure |
|
FTE |
|
Total run |
|
|
|
|
(£m) |
|
|
|
(£m) |
|
|
Distribution |
|
35 |
|
c. 400 |
|
29 |
|
|
|
|
|
|
|
|
|
|
|
Products |
|
12 |
|
c. 200 |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
Production |
|
16 |
|
c. 500 |
|
14 |
|
|
|
|
|
|
|
|
|
|
|
Central Support |
|
46 |
|
c. 600 |
|
59 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
109 |
|
c. 1,700 |
|
117 |
|
• Benefits are against planned 2005 expense base
• £73m of restructure charge is personnel related, £36m is surplus lease provision
• Modest use of provision current year, expect 80% to be used by September 2006
• Plan to achieve 80% of FTE reductions by September 2006
74
Summary of UK restructuring plans
• Implementation of a UK efficiency program has commenced
• Benefits begin in September 2005 half year with full run rate benefits of £117m by September 2007
• Program is key part of “doing what we do better” and consistent with overall UK strategy
• Implementation of growth initiatives continuing as planned
• Program benefits are consistent with improving profitability. Further work required to achieve UK peer performance levels.
75
Disclaimer
This presentation contains certain “forward-looking statements” within the meaning of Section 21E of the US Securities Exchange Act of 1934 and the US Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “expect”, “project”, “estimate”, “likely”, “intend”, “should”, “could”, “may”, “target”, “plan” and other similar expressions are intended to identify forward-looking statements. Indications of and guidance on future earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. For further information relating to the identification of forward-looking statements and important factors that could cause actual results to differ materially from those projected in such statements, see “Presentation of Information - Forward-Looking Statements” and “Risk Factors” in the Group’s Annual Report on Form 20-F filed with the US Securities & Exchange Commission.
76
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
|
|
|
|
NATIONAL AUSTRALIA BANK LIMITED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brendan Case |
|
|
Date: |
3 June 2005 |
Title: |
Associate Company Secretary |
|