National Looks Set For Another Sound Year National Australia Bank today reported a Group operating profit after tax (before abnormals) of $1,109 million for the six months to 31 March 1998. This compares with $1,139 million earned in the March 1997 half year. Operating profit after tax (before abnormals) for the March 1998 quarter was $576 million compared with $533 million for the previous quarter and $557 million for the March 1997 quarter. Operating profit after tax and abnormals for the March 1998 half year was $958 million. This includes an abnormal charge of $229 million ($151 million after tax) in connection with previously reported restructuring initiatives. Directors have declared an interim dividend of 49 cents per share. This compares with 45 cents per share in the previous corresponding period. Underlying profit (before tax, doubtful debts and abnormals) rose 4.7 per cent from $1,855 million in March 1997 to $1,943 million in the 1998 first half. The Group benefited from a strong performance by its overseas banks and excellent growth in non interest income. Australian Financial Services' performance reflected the major changes in structure, marketing, operations and distribution it launched over a year ago. The National's Managing Director, Mr Don Argus said the latest result indicated the Group was on track for another successful year. "We have continued to meet or better our expectations in key operating areas," Mr Argus said. "Considering the intensity of competition in all markets and the major changes underway in our Group this is a highly creditable result. "Progress with the implementation of our new business structure and operating model has been very encouraging. "The acquisition of HomeSide Inc. was successfully completed. This is an important strategic initiative and the company is already contributing to our Group earnings," Mr Argus said. Group net interest income rose 6.7 per cent from $2,592 million in 1997 to $2,765 million in the latest half year. Interest margins for the half were lower with competitive pressures in Australia accounting for most of the decline. Despite this, volume growth boosted net interest income. Loans and advances increased by 20.9 per cent over the 1997 first half. Home lending was up 20.1 per cent, lease financing 36.0 per cent and credit cards 18.3 per cent in the latest period compared with March 1997. Non interest income increased 23.9 per cent from $1,613 million at March 1997 to $1,998 million for the current half. The proportion of other operating income to total net income increased to 41.9 per cent for the March 1998 half compared with 38.4 per cent in the previous corresponding period. For the March 1998 quarter the ratio increased to 43.7 per cent. The increase over the March 1997 half was primarily due to higher income from areas such as loan banking fees (up 18.2 per cent) and money transfer fees (up 19.5 per cent) and general fees and commissions (up 25.4 per cent). The acquisition of HomeSide Inc. provided an additional $62 million in other operating income including $40 million net mortgage servicing fees. Australia Australian Financial Services contributed $634 million (before abnormal items) in the March 1998 half compared with $665 million for the March 1997 half. Underlying profit grew by 3.9% to $1,076 million. Both net interest and other operating income increased in the half. The Australian Bank achieved strong growth in home lending, fixed rate business lending and bill acceptances. Net loans and acceptances rose 20.1 per cent over March 1997. The housing component of this increased 22.5 per cent. The growth in lending was matched by a pleasing lift in bank deposits which were up 18.3 per cent compared with the corresponding period in 1997. Improved results were achieved by the National's various "non bank" subsidiaries in Australia. National Australia Trustees profit grew 81 per cent. The major contributor to this being growth in its Common Fund A1 with funds under management rising 20 per cent to $1.2 billion. Custodian Services increased its market share in all of its businesses. Assets under custody and administration now total $95 billion. Strong business growth and tight cost control resulted in a 21 per cent increase in profit. National Australia Financial Management had strong growth in sales of trusts, superannuation and retirement income products. This contributed to a marginal increase in profit for the March 1998 half. National Australia Asset Management and County Investment Management increased wholesale and retail funds under management during the latest period. International The European Group continued to perform strongly with a $103 million or 47.9 per cent increase in profit (before abnormal items) from $215 million to $318 million. Of this increase, $48 million was attributable to exchange rate movements during the period. Profit (before abnormal items) of the Yorkshire Bank was up 54.1 per cent to $171 million. Clydesdale rose 37.9 per cent to $120 million, Northern 27.1 per cent to $75 million and National Irish 61.5 per cent to $21 million. In the United States, Michigan National increased half year profit 7.6 per cent from $92 million to $99 million. HomeSide Inc. made a debut contribution of $16 million. The after tax profit of the Bank of New Zealand was down 18.6 per cent to $140 million. This was primarily due to the inclusion of a writeback of a non lending loss provision ($20 million) in the prior period results and the impact of the transfer of BNZ Australia to the Australian Bank effective May 1997 ($17 million). Excluding these factors, underlying profit of BNZ rose by 5 per cent during the half. Net interest income (excluding BNZA) was marginally higher than in the previous corresponding period. This volume increase was partly offset by lower margins. Other operating income also grew with rises in fees and commissions, particularly credit cards and insurance. The contribution of operations in the Asian Region increased from $15 million to $21 million. General Issues During the six months, the Group booked restructuring costs of $229 million ($151 million after tax). This cost has been classified as an abnormal item due to its size and effect on the Group's results. The charge for doubtful debts was up by $163 million over the 1997 half to $268 million. This reflects an increased specific and general provision charge in the current half coupled with the impact on the 1997 charge of high specific provision recoveries in Australia and New Zealand. The increase in the Group's general provision charge from $36 million to $102 million was included in the $268 million total doubtful debts charge. This rise was primarily due to increases in loan volumes during the period. The specific provision coverage on non accrual loans increased from 44.5 per cent at September 1997 to 50.1 per cent in the latest period. The ratio of gross non accrual loans to risk weighted assets remained steady at 0.8 per cent (compared with September, 1997). Looking ahead, Mr Argus said trading conditions in all markets would remain highly competitive. He also noted the additional uncertainty, particularly in the case of Australia, caused by sluggish growth in Asia. "The uncertainty created by Asia will impact on other major economies as well as continuing to depress immediate prospects in our Region. "There is no doubt that the coming months will be challenging. "Our focus will remain on diversifying our income streams, eliminating costs and progressing our new global business model. "We remain optimistic about the quality of our full year results and our ability to sustain growth," Mr Argus said. Melbourne, 7 May 1998. For further information: Ron Burke
General Manager
Group Corporate
Relations
Tel: (03) 9641 3876 | Haydn Park
Manager
Group Media
Relations
Tel: (03) 9641 3857 | | 
