Media Release

National Reports Strong First Half Result

National Australia Bank today announced a 28.7% increase in net profit after tax to $2,025 million for the six months to 31 March 2001.

Earnings per share increased 26.2% to 125.3 cents. Return on average shareholders funds was up to 19.0%.

The Directors declared a fully franked interim dividend of 67 cents a share, payable on 4 July 2001, an increase of 13.6% over the previous corresponding half.

"The Retail Banking businesses performed strongly, while the newer Wealth Management and Wholesale Financial Services really started delivering. Wealth Management contributed $364 million for the half - an excellent result for the first full period after the acquisition of MLC.

"We said 12 months ago that we would accelerate the growth in these businesses, and that is what we're doing.

The results include:

• Banking and Other Financial Services reported a 15.3% increase in profit to $1,520 million, driven by a 12.2% increase in total income to $5,064 million. This category comprises Business and Personal Financial Services, Wholesale Financial Services, Specialist and Emerging Businesses and National Shared Services.
  
  
• Net interest income for these businesses increased 13.1% to $3,089 million and other operating income grew by 10.8% to $1,975 million, representing 39.0% of total income. Expenses increased by 8.5%, however much of this related to income growth, with the cost income ratio improving from 51.4% to 49.7% and although expenses increased by 8.5%, much of this related to income growth.
  
  
• Business and Personal Financial Services increased profit after tax by 13.4% to $1,119 million, due to strong lending and deposit growth, and significant home loan growth in each of the Group's markets.
  
  
• Wholesale Financial Services produced a record $347 million profit for the half, up 29.0% on the March 2000 half, with particularly strong contributions from the markets and structured finance areas.
  
  
• Wealth Management produced an excellent result driven by significant growth in new business. The $364 million contribution comprises $175 million operating profit and $189 million after tax revaluation profit, and compares with the $65 million earned in the March 2000 half before the MLC acquisition. The integration with MLC is proceeding successfully and on track to deliver major synergies.
  
  
• HomeSide's contribution fell to $71 million after tax from $84 million, however this represents an improvement on the September 2000 half contribution of $48 million. The improvement is due to a 9.7% increase in profit from the US operations, which reflects the recent recovery of production volumes in the US due to falling mortgage interest rates, the development of the Australian business, and the impact of the weaker Australian dollar.
  
  
• Offshore earnings increased by $129 million or 19.9% to $778 million, or 10.2% excluding the impact of the falling Australian dollar.

Leveraging capabilities and diversity to drive growth

During the half the National's businesses continued to leverage capabilities and diversity to drive growth. Some of the initiatives include:

• The ongoing successful implementation of the Group's market leading Customer Relationship Management (CRM) model. "National Leads", the predictive sales leads generation tool used in Australia, is being launched in each region, further enhancing the Group's leadership in customer information management. During the half to March 2001 National Leads generated over 570,000 new leads which resulted in $4.4 billion of new loans.
  
  
• Expansion of the financial planning capacity continued in Australia and Great Britain, supporting the delivery of National and MLC wealth management products to our customers. In Australia the financial planning force was increased from 243 to 1,556 planners and advisers, as a result of the MLC acquisition and a recruiting campaign.
  
  
• The establishment of the MLC service platform in the UK, which is advancing well and is expected to be launched in the fourth quarter 2001. This will position the business strongly for expansion into the UK funds management industry.
  
  
• Leveraging HomeSide US's expertise in the origination market, HomeSide Australia has greatly expanded the wholesale (broker) channel for sourcing home loans. HomeSide's Australian volumes now routinely exceed $200 million per month, compared with an average of $56 million per month two years ago. Mortgage origination through the HomeSide channel in Australia accounted for 12.8% of total inflows in the half year.
  
  
• Our internet-based home loan business, HomeSide Solutions, has written US$500 million of new business since last November.
  
  
• The Wholesale Financial Services Australian risk management products were successfully exported to the UK and Ireland, which has contributed to the competitiveness of the Group's regional banks in those markets.

Outlook

Mr Cicutto said that while he expected the economic environment and trading conditions to be softer in the second half, the Group was on track to achieve the targets set last year of earnings per share growth in excess of 10%, and EVA (Economic Value Added) growth of more than 5%.

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