Media Release

Core Businesses Underpin National's Record Interim Profit Result

The National Australia Bank today announced a record $2,256 million Group net profit for the half year ended 31 March 2002 - 11% higher than the result for the same period last year before significant items.

Cash earnings per share before significant items increased 7.4 cents to 126.8 cents per share and the interim dividend has increased by 8% to 72 cents per share fully franked.

Net profit from core operations was $2,156 million - up 15% on the same period last year.

Managing Director and Chief Executive Officer, Frank Cicutto, said: "We continue to deliver excellent results from our core businesses. We generated double-digit profit growth in our major markets - Australia, Europe and New Zealand.

"Net profit from our retail banking activities was 27% higher at $1,457 million.

"We continue to do well in home lending, which was up 14% to $85 billion compared with March 2001. In Australia, our home loan market share improved to 17.6% from 17.3% in the 12 months to February 2002, growing 11% above financial system growth. Other highlights included growth in agribusiness deposits - up 46% compared with the previous corresponding period - and credit card volumes up 10.6% to $3.4 billion.

"Wealth Management saw a 7% increase in operating profit before revaluations and outside equity interests and has $70 billion in funds under management and administration as at 31 March 2002. In Australia, insurance sales were 46% higher and we captured 21.5% of retail funds inflow for the year to 31 December 2001.

"Two large provisions and less favourable market and economic conditions after September 11 impacted Wholesale Financial Services' profit, which was flat on the previous corresponding period. However, this business is positioned to grow as the business cycle improves.

"Asset quality remains sound with the percentage of non accrual loans to total loans declining to 0.75% overall and 0.69% in Australia.

"Our interim result demonstrates that the group's core businesses are soundly based and we are on track to delivering more than 10% cash earnings growth and Group cash earnings per share growth of 7-10% for the full year.

"We have emerged from a period of significant re-positioning and our strategies are delivering.

"Over the last two years, we have expanded our wealth management operations with the acquisition of MLC and several smaller acquisitions. We have exited our US regional banking operations and disposed of HomeSide's operating platform.

"We have sharpened our focus and strategic agenda, which includes strengthening and growing our core banking and wealth management businesses to deliver integrated financial services. Several hundred million dollars have been earmarked for investing in Wealth Management in Australia and the United Kingdom and upgrading IT networks at Clydesdale and Yorkshire Banks.

"Investments we have already made in Australia, such as Customer Relationship Management, web enablement and a new Internet Banking platform, are delivering results. Our Australian profit is up 22% and this follows a strong result for the 2001 full year.

"In Great Britain and Ireland we saw 18% profit growth which follows double digit growth last year. We are targeting further investment in this market as a result of the Positioning for Growth initiatives.

"The National is the only Australian bank with significant offshore growth options. We have also differentiated ourselves domestically in the wealth management market.

"On the cost side, we are committed to delivering savings of more than $370 million by September 2004 and significantly improving cost-to-income ratios for each region.

"As announced in April this year, we are targeting cash earnings per share growth of greater than 12% in 2003 and 2004. This is subject to the usual caveats around exchange rates and credit environment.

"In addition to cash earnings growth, our target is to achieve 5% compound growth in EVA (Economic Value Add) over the next three years and a return on equity of greater than 18% over the same period.

"Today, we have announced an extension of our share buy back program, as part of our capital management policy. This is covered in a separate announcement to the Australian Securities Exchange.

"We are firmly committed to balancing the needs of all our stakeholders and building a sustainable business for the future. We continue to address issues of access and affordability of bank services. This work has led to the development of the National Concession Card Account - effectively a fee-free bank account for pensioners and health care cardholders.

"We have also expanded our face to face network with over 2,900 Australia Post locations, providing personal customers with day to day banking. Our arrangement with Australia Post is allowing us to deliver on our commitment to provide face to face banking to all communities.

"Across Australia we continue to operate a network of 850 retail outlets, 185 Business Banking Centres, 70 Financial Services Centres, 13 Private Banking Suites and 110 Agribusiness Banking facilities. Over half our network is located in rural and regional areas."