| National Profit Up 18.9 Per Cent The National Australia Bank today reported a June 2000 quarter profit after tax of $829 million, an increase of 18.9 per cent on the $697 million earned in the June 1999 quarter and a record quarterly result. Group operating profit after tax for the nine months to 30 June 2000 was $2,402 million. This was 15.1 per cent higher than the $2,086 million earned in the nine months to June 1999. For the latest quarter, underlying profit (before tax, and charge for doubtful debts) was $1,422 million - 17.8 per cent higher than the $1,207 million earned in the June 1999 quarter, and a 6.5 per cent increase on the $1,335 million earned in the March quarter. Underlying profit for the nine months to 30 June 2000 was up 12.7 per cent to $4,080 million compared with $3,619 million in 1999. The return on average ordinary shareholders' funds increased from 17.03 per cent for the March 2000 quarter to 17.45 per cent for the June 2000 quarter. On a cash earnings basis (earnings before goodwill) the return on average tangible ordinary shareholders' funds increased from 21.53 per cent for the March 2000 quarter to 21.90 per cent for the June 2000 quarter. The National's Managing Director, Frank Cicutto said that the result was a solid performance particularly given it was achieved against a backdrop of difficult trading conditions for HomeSide in the United States. "The Group has once again demonstrated its fundamental strength and its capacity to generate sound performance, whilst moving forward on several strategic fronts. "Our purchase of MLC was completed as expected on 30 June and HomeSide has announced a strategic alliance with Fannie Mae that will reshape the market for on-line mortgage origination in the United States. We have also launched O2-e, a wholly owned subsidiary, established to participate in the Internet driven revolution, and to develop a core portfolio of rapid growth businesses capable of delivering core earnings growth in the future. "We continued to gain benefits from our geographic diversity and our growing involvement in wealth management businesses," he said. Both net interest income and other operating income grew during the latest quarter. This produced total operating income 12.8 per cent higher than the quarter to June 1999, and 8.1 per cent higher on a year to date basis. The Group margin for the nine months to June 2000 was 2.94 per cent compared with 3.02 per cent for the previous corresponding period. Importantly, the recovery in margin evident in the March quarter (2.95 per cent) from the December low of 2.92 per cent has been maintained in the current quarter. Other operating income for the nine months to June 2000 of $1,319 million was 14.2 per cent higher than in June 1999. The growth mostly came from wealth management, credit card and wholesale activities. Year to date other operating income was up 11.3 per cent. The share of other operating income to total income increased from 43.7 per cent in the June 1999 quarter to 44.2 per cent in the latest period. With the acquisition of MLC, this share will increase as the National continues to diversify its income streams. The Group's commitment to maintaining tight control over costs was demonstrated with a cost to income ratio of 50.7 per cent for the latest quarter. This compares with 52.4 per cent in June 1999. Australia Australia continued its recent strong performance with an 18.2 per cent increase in profit for the June 2000 quarter to $409 million, compared with $346 million for June 1999. Profit for the quarter was only slightly up on the previous quarter due largely to abnormally low provisioning in the March 2000 quarter. The year to date profit for the Australian Group rose 12.6 per cent from $1,064 million to $1,198 million. Underlying profit for the nine months to June 2000 was $2,085 million - up 17.0 per cent on the previous corresponding period. Net interest income for the June 2000 quarter was up 6.9 per cent and reflected a 6.3 per cent increase in interest earning assets on a slightly improved interest margin, which increased from 3.07 per cent to 3.08 per cent. Other operating income was up 8.7 per cent due to a number of factors including higher loan fees and increased contributions from wholesale operations. International In the June 2000 quarter, the Group earned $420 million - or 50.7 per cent of its after tax operating profit from its international operations. Profit for Europe for the latest quarter was $225 million compared with $174 million in June 1999. European profit for the nine months to June 2000 was up 7.7 per cent to $627 million. Excluding the impact of exchange rate movements profit was 8.4 per cent higher than in 1999. The increase in profit reflects higher net interest income from significant growth in volumes and an increase in other operating income primarily from loan fees and commissions. Clydesdale, Northern and Yorkshire all had solid rises in profit in the nine months. National Irish Bank profitability was down due to reductions in both net interest and other operating income, as well as an increase in the charge for doubtful debts. In the United States, Michigan National's performance was flat for the quarter, but was up 11.4% for the nine months to 30 June 2000. HomeSide continues to encounter difficult trading conditions in the United States and has recently announced a number of major initiatives, which are expected to result in a return to growth. The New Zealand Group's profit for the nine months to June 2000 was $176 million - 4.8 per cent higher than the previous corresponding period. Excluding the impact of exchange rate movements, the latest nine months result was 10.8 per cent higher. Bank of New Zealand's profit for the nine months was up 4.7 per cent to $225 million. In local currency terms, the profit was up 10.5 per cent. For the June 2000 quarter profit was up 32.4 per cent to $90 million compared with $68 million in March 2000. Both net interest and other operating income rose, while the doubtful debts charge fell due to improved asset quality. Asia continued to improve with an operating profit for the nine months to June 2000 of $36 million compared with $27 million in the previous corresponding period. This improvement continued into the latest quarter with profit of $20 million compared with $16 million in the March quarter. General
The charge for doubtful debts for the nine months to June 2000 was $415 million. This was $50 million lower than the previous corresponding period, reflecting lower provisioning charges in the United States and Asia, partly offset by volume related increases in Europe. Gross non-accrual loans to gross loans and acceptances fell from 0.78 per cent in June 1999 to 0.73 per cent in the latest quarter. Looking ahead, Mr Cicutto said: "The economic environment in our key market areas is favourable with moderate to high GDP growth expected. "Credit growth is also expected to be strong in Australia, New Zealand and in Europe. In the United States growth is moderating, although it will still remain at a healthy level. "We will gain the benefits of the integration of MLC, as well as the general improvements we have made to our operations across the Group. "In summary, we are confident about our ability to meet performance targets for the full year, whilst continuing to lay the foundation for further growth in the coming years," Mr Cicutto said. Melbourne 27 July 2000. For further information contact: Brandon Phillips
Group Manager Media Relations
Tel: (03) 8641 3857
Mobile: 0419 369 058
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