NAB surge in bad debts amid profit announcement
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The NAB commenced the Australian bank reporting season with a surge in bad debts to indicate the recession is finally taking a big toll on the Australian economy.
NAB’s bad debts rose from $726 million to $1.8 billion as the worsening business and consumer conditions start to show considerable strain on the banking sector. Cash earnings fell to $2 billion (down 9.4%) with rising impairment charges and higher funding costs. The net profit was only down 0.9% to $2.66 billion.
The NAB also announced a dividend cut as previously foreshadowed, the cut of 24c per share took the dividend to 73c per share. The cut will preserve capital and the dividend will also be partially underwritten by a $500 partially underwritten dividend reinvestment plan.
NAB shares retreated 76c to $21.82, as the bank slashed its dividend by 24c to 73c to preserve capital, and backed it up with a $500 million raising through a partly underwritten dividend reinvestment plan.
The result did nothing to soothe the markets expectations of further pressures on the banking sector and accordingly NAB and the other banks were sold off amid concerns of continued hard economic times.
Macquarie deliver better than expected profit
The Macquarie Group delivered a better than expected profit today amid the continuing economic gloom unveiling a net profit of $604 million for the xic months to 30 September 2008.
Macquarie’s profit fell by 43%, however profits where ahead of analyst expectations.
What had pleased the market and pushed the Macquarie Group share price up immediately was news that the bank had surplus capital of $3.3 billion and had no plans to access capital markets for funding.
Macquarie’s statement of considering acquisitions was also a major positive for the share price. The CEO Nicholas Brown confirmed the bank was planning job cuts and expected profits to grow although at a lower level amid difficult trading conditions.
To read the announcement click Macquarie Bank.
ANZ profit falls by 21% to $3.319 billion
Australia’s fourth largest bank, the ANZ announced an annual profit fall of 21% to $3.319 billion in what was a result within previous indicated guidance by the ANZ.
Bearing increasing pressure to the global financial crisis the ANZ was still able to record a cash profit that fell 23 per cent to $3.03 billion. Despite the pressure on the ANZ Bank CEO Mike Smith was pleased with the way the ANZ was able to absord and deal with the financial crisis gripping the globe.
The ANZ had taken $1.95 billion in provisions for its exposure to problem loans and the deteriorating global econony. The bank also took a $721 million charge for credit risk on derivatives. This was an increase from $45 million a year ago.
Mike Smith told reporters, “If everything stabilises, and we get back on track, then I expect to see an increase in earnings”. This is a positive sign from a CEO that is hanging his reputation on the success of the ANZ’s push to become a super regional bank within the Asia Pacific region.
ANZ declared a final dividend of 74 cents, taking the total dividend for 2008 to $1.36, the same as in 2007.
Click ANZ to read the profit media release announced this morning.
NAB Profit Announcement - down 0.9%
The National Australia Bank has announced their full year profits this morning with a 0.9% fall due to provisioning relating to their US mortgage exposure.
NAB announced a net profit for the year ended 30 September 2008 of $4.54 billion down from $4.58 billion the prior year.
A more accurate profit figure the cash earnings fell 10.7 per cent to $3.92 billion, this was in line with NAB’s previous guidance.
The result included a $1.01 billion provision for possible losses on a $1.2 billion portfolio of collateralised debt obligations (CDOs), which were backed by US mortgages.
The National Australia Bank also took a $100 million hit after it took out additional hedging.
To reflect the tightening economic conditions their bad and doubtful debt charges were up 55 per cent.
NAB mentioned in the analyst briefing that their net interest rate margin of 2.42% for fiscal 2008 would be difficult to achieve in 2009 due to the skyrocketing cost of deposits.
The result generally indicates the strength of the Australian economy which has kept the core of NAB solid, the result is sensational when compared with overseas banks who have been smashed by defaulting loans and the broader credit crisis.
The NAB announced a rise in the final dividend by 2c to 97c fully franked, or 194c for the year.
Upcoming Bank Profit Announcements
The next two weeks will see all the major Australian banks except the Commonwealth Bank announce interim profit figures. This will be a very important guage to determine the health of the Australian banking system and is likely to reveal the actual pain the banks have been undergoing.
Of course this will not stop the banks from making huge profits but no doubt a number of them in particular NAB and ANZ will take a hit from the economic implosion. That said, we are lucky to have such well run banks in Australia and this will provide some insulation for the issues affecting banks overseas.
Westpac will be the best performer based on the strong domestic focus and focused management. St George are also likely to fair well in the reporting season.
The reporting calender is
23rd October 2008 - ANZ Bank - Annual Profit Announcement
29th October 2008 - St George - Annual Profit Announcement
30th October 2008 - Westpac - Annual Profit Announcement
31st October 2008 - NAB - Annual Profit Announcement
The Commonwealth Bank will report their interim profit announcement on 11th February 2009.
We will report on the banks profit announcements as they are announced.