United States

The United States (excluding Michigan National Corporation) contributed profit after tax of $133 million compared to $140 million for the previous corresponding period, a decrease of 5.0%.

HomeSide
NAB New York

HomeSide International Inc ⁽¹⁾

Profit & Loss Australian Dollars	Half Year to			Favourable / (Unfavourable) Change from
	Mar 01 $m	Sept 00 $m	Mar 00 $m	Sept 00 %	Mar 00 %
Mortgage servicing fees	805	641	559	25.6	44.0
Amortisation of mortgage servicing rights	491	351	314	39.9	56.4
Net servicing revenue	314	290	245	8.3	28.2
Net interest income	(71)	(58)	(19)	(22.4)	large
Net mortgage origination revenue	96	48	57	large	68.4
Other income	15	6	7	large	large
Total operating income	354	286	290	23.8	22.1
Other operating expenses	218	171	147	(27.5)	(48.3)
Underlying profit	136	115	143	18.3	(4.9)
Provision for doubtful debts	34	30	25	(13.3)	(36.0)
Profit before tax	102	85	118	20.0	(13.6)
Income tax expense	37	30	32	(23.3)	(15.6)
Profit after tax	65	55	86	18.2	(24.4)

Profit & Loss United States Dollars	Half Year to			Favourable / (Unfavourable) Change from
	Mar 01 $m	Sept 00 $m	Mar 00 $m	Sept 00 %	Mar 00 %
Mortgage servicing fees	428	375	357	14.1	19.9
Amortisation of mortgage servicing rights	261	206	200	26.7	30.5
Net servicing revenue	167	169	157	(1.2)	6.4
Net interest income	(38)	(35)	(12)	(8.6)	large
Net mortgage origination revenue	51	28	36	82.1	41.7
Other income	8	4	4	large	large
Total operating income	188	166	185	13.3	1.6
Other operating expenses	116	101	93	(14.9)	(24.7)
Underlying profit	72	65	92	10.8	(21.7)
Provision for doubtful debts	18	17	16	(5.9)	(12.5)
Profit before tax	54	48	76	12.5	(28.9)
Income tax expense	20	17	21	(17.6)	4.8
Profit after tax	34	31	55	9.7	(38.2)

(1) Comprises the US operations of HomeSide only

Highlights

HomeSide US contributed a profit of $65 million compared to $86 million in March 2000, however this represents an improvement on the September 2000 half contribution of $55 million.

Excluding an $11 million credit due to a restatement of deferred tax liabilities in the March 2000 half and the impact of exchange rate movements, HomeSide's profit decreased by 29.2% on the March 2000 half year.

Net servicing revenue increased 28.2% over the previous corresponding period to $314 million (6.4% in local currency terms) due to a US$36.9 billion (24.2%) increase in the average servicing portfolio and a higher amortisation rate, reflecting the impact of declining mortgage interest rates on prepayment activity. Mortgage origination revenue increased by $39 million or 68.4% (41.7% in local currency terms), as a result of increased refinance activity due to the decline in US interest rates. In addition pricing competition and extreme rate volatility in the market caused a decrease in margins.

HomeSide also experienced a significant decrease in net interest income of $52 million ($26 million in local currency), largely due to increased borrowings to fund the mortgage servicing business.

NAB New York

Profit & Loss Australian Dollars	Half Year to			Favourable / (Unfavourable) Change from
	Mar 01 $m	Sept 00 $m	Mar 00 $m	Sept 00 %	Mar 00 %
Net interest income	109	85	72	28.2	51.4
Other operating income	38	33	17	15.2	large
Total operating income	147	118	89	24.6	65.2
Other operating expenses	42	36	26	(16.7)	(61.5)
Underlying profit	105	82	63	28.0	66.7
Provision for doubtful debts	11	5	(5)	large	large
Profit before tax	94	77	68	22.1	38.2
Income tax expense	11	7	(3)	(57.1)	large
Profit after tax before goodwill and abnormals	83	70	71	18.6	16.9

Profit & Loss United States Dollars	Half Year to			Favourable / (Unfavourable) Change from
	Mar 01 $m	Sept 00 $m	Mar 00 $m	Sept 00 %	Mar 00 %
Net interest income	58	51	45	13.7	28.9
Other operating income	20	20	11	-	81.8
Total operating income	78	71	56	9.9	39.3
Other operating expenses	22	22	16	-	(37.5)
Underlying profit	56	49	40	14.3	40.0
Provision for doubtful debts	6	3	(3)	large	large
Profit before tax	50	46	43	8.7	16.3
Income tax expense	6	5	(2)	(20.0)	large
Profit after tax before goodwill and abnormals	44	41	45	7.3	(2.2)

Highlights

NAB New York operations reported a 2.2% decrease in profit after tax before abnormals from US$45 million to US$44 million. The decrease was due to the inclusion in the March 2000 half results of a one off tax credit in relation to the Group hedging activities. Net interest income increased from March 2000, with stronger treasury income as a result of changes in interest rates, and increased lending to clients. Other operating income increased with stronger sales of foreign exchange and interest rate risk management products to clients and favourable risk management income. This continued growth has resulted in increased operating costs. This growth reflects the variable nature of these expenses, which have increased as a result of the strong growth in income over the same period. Bad and doubtful debts increased reflecting increased statistical provisioning as a result of the impact of changes in the economic cycle on credit quality.