2000 Half Year Financial Results

National Australia Bank today reported a record half yearly result. The Group's operating profit after tax of $1,573 million for the six months to 31 March 2000 was 13.2 per cent higher than the $1,390 million earned in the March 1999 first half and 9.9 per cent higher than the $1,431 million for the September 1999 half.

Operating profit after tax for the March 2000 quarter was also a record at $802 million. This represents a 20.4 per cent increase on the March 1999 quarter result of $666 million and is 4 per cent higher than the December 1999 quarter of $771 million.

Profit attributable to ordinary shareholders for the six months to March 2000 was $1,480 million, 8.7 per cent higher than the 1999 first half.

Underlying profit (before tax and doubtful debts) rose 10.2 per cent from $2,412 million in the March 1999 first half to $2,658 million in the latest period.

Total income for the six months to 31 March 2000 increased by 5.8 per cent from $5,293 million for the March 1999 half to $5,598 million.

Net interest income was up $85 million or 2.8 per cent over the previous corresponding period.

Other operating income for the latest half increased 9.8 per cent to $2,475 million compared with $2,255 million in the six months to 31 March 1999 and represents 44.2 per cent of the Group's total income compared with 42.6 per cent for the 1999 first half.

The Group's cost to income ratio continued to improve and was 50.8 per cent for the latest period compared with 52.5 per cent for the 1999 first half. Operating costs to total assets decreased to 1.99 per cent for the six months to 31 March 2000 from 2.18 per cent for the March 1999 half.

Return on average ordinary shareholders' funds was steady at 17.41 per cent. There was a 9 per cent increase in average shareholders' funds over the period.

Directors have declared a higher interim dividend of 59 cents a share. This compares with 54 cents a share in the previous corresponding period and 58 cents a share for the final dividend for the 1999 year. The interim dividend for 2000 is fully franked.

Profit for the Australian operations was up 16.4 per cent to $788 million in the current half compared with $677 million for the September 1999 half and is 9.9 per cent higher than the March 1999 half of $717 million. The March 2000 half was unfavourably impacted by a higher tax charge resulting from the restatement of net future income tax benefits totalling $41 million. Excluding the impact of the restatement, the Australian result increased 22.5 per cent over the September 1999 half and was 15.6 per cent higher than the March 1999 half. The increase over both periods reflects strong growth in income, a lower charge for doubtful debts and improved productivity.

Earnings from the Group's international operations increased 16.6 per cent from the March 1999 half to $785 million for the six months to March 2000 and were 4.2 per cent higher than the September 1999 half of $753 million. Earnings from overseas operations now represent 49.9 per cent of the Group's profit after tax.

Profit in Europe was $402 million compared with $407 million in the March 1999 half. In local currency terms, profit in Europe increased by 2.5 per cent. However, the current half's profit was 13.6 per cent higher than the September 1999 half of $354 million.

Yorkshire Banks' profit increased by 8.9 per cent from $180 million for the March 1999 half to $196 million for the current half. In local currency terms, profit increased by 13.2 per cent. The current half's result is 20.2 per cent higher than the September 1999 half of $163 million and 20.3 per cent higher in local currency terms.

Northern Bank's contribution increased 5.1 per cent from $79 million for the March 1999 half to $83 million for the March 2000 half. In local currency terms, profit increased by 10 per cent. The contribution for the September 1999 half was $92 million and was favourably impacted by gains on sale of properties. Excluding the impact of these sales, the result in the current half was steady compared with the September half.

At Clydesdale Bank, profit decreased 4.3 per cent from $162 million for the March 1999 half to $155 million for the current half. However the result is only down 1 per cent in local currency terms. Excluding the gain on sale of equity investments recorded in the March 1999 half, but not repeated in the current half, Clydesdale's profit increased 10.9 per cent in local currency terms.

Clydesdale Bank's result for the September 1999 half was $100 million. Excluding the impact of a realignment of statistical provisioning charges across the European banks, the September half result for Clydesdale was $155 million, comparable with the current half.

Profit at National Irish Bank showed a reduction from $22 million for the six months to March 1999 to $12 million in the current half. This compares with $9 million for the September 1999 half. The current period reflects the impact of increased competition on net interest margins and a higher charge for doubtful debts partly offset by cost efficiencies resulting from a number of process improvement initiatives.

In the United States profit was up from $158 million in the 1999 first half to $265 million in the latest period and compares with $225 million in the September 1999 half. The current result includes a solid contribution from Michigan National Corporation, higher profits from HomeSide and interest income attributable to the issue of National Income Securities in June 1999.

New Zealand's profit in the latest half was $102 million, down slightly on the $108 million recorded in the corresponding period of 1999. The March 2000 half year was unfavourably impacted by exchange rate movements. In local currency terms, New Zealand's profit improved by 2.8 per cent. The current result was down on the September 1999 half of $131 million. The September result reflected a weaker New Zealand dollar and lower charge for doubtful debts.

Profit in Asia improved to $16 million compared with a breakeven result for the first half of 1999 and $42 million for the September 1999 half. The March 1999 half was impacted by a higher charge for doubtful debts. The result for the September 1999 half benefited from high levels of trading income and a lower charge for doubtful debts compared with the current half.

On 10 April 2000, the National announced it had agreed to acquire MLC Limited and other funds management businesses from Lend Lease Corporation Limited for $4.56 billion. The acquisition, which is subject to receipt of necessary approvals, is expected to be completed by the end of June 2000.

The combined funds under management of the National and MLC in Australia will exceed $52 billion, making the Group one of the largest participants in the financial services arena, with a particularly strong presence in retail markets.

The acquisition will leave the Group well placed to take advantage of the growth in Australian financial services and to utilise its wealth management expertise to expand the range of financial services provided to its large international customer base.

The Group's Managing Director, Mr. Frank Cicutto, commented that the current result confirms the depth and diversity of the Group's earnings streams and its ability to adapt to sustained competition and varying economic conditions.

"During the latest six months we have seen continued strong growth in lending activity, fee based services and tight containment of costs.

"The latest performance is satisfying, considering the broad range of strategic activities the Group has undertaken during the past six months.

"The National has completed a major review of its corporate strategy, restructured its operations and is close to finalising the major acquisition of MLC Limited.

"The ability to both manage this necessary transformation and continue to achieve record profits is a testimony to the overall quality of the Group.