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The National Australia Bank has identified classification errors in the 2005 Annual Financial Report that overstated the reported level of lending to the real estate construction sector.
In Note 16 on page 151 and Note 11 on page 144 covering industry sector concentrations in Australia it is incorrectly reported that loans and advances and customer acceptances to the construction sector total $5.7 billion. These industry concentrations are also reported in the table on loans by industry sector on page 52.
In fact, based on subsequent review, the aggregate amount of loans and advances and customer acceptances to the real estate construction sector (including reclassified overdrafts), is $1.6 billion for 2005. This compares to $1.1 billion for the prior year.
In Note 16 on page 151 it is also incorrectly reported that instalment loans to individuals and other personal lending (including credit cards) in 2005 total $21.6 billion. This total includes $6.2 billion of overdrafts to entities that were incorrectly classified.
The data for Australia in Note 16 and Note 11 has been corrected for the 2004 and 2005 financial years and is included in the tables below.
However, the total amount disclosed in Notes 11 and 16 for loans and advances and customer acceptances is correct and the revisions do not affect reported earnings or the financial position of the company.
National Australia Bank auditor Ernst & Young has reviewed these new disclosures for 2005 and 2004 and have agreed the approach adopted.
National Australia Bank Director Finance and Risk, Mr Michael Ullmer said: "The core financial information systems of the company are sound and controlled effectively. These misclassifications do not change reported earnings or the financial position of the company.
"The industry classifications are derived from ancillary systems, which require considerable manual processing.
"As noted on page 66 of the 2005 Annual Financial Report, there is a significant over-reliance on manual processes. Steps are being taken to upgrade these systems to reduce the reliance on manual processes.
"All related disclosures in the 2005 Annual Financial Report will be reviewed by no later than the half year profit announcement.
"I believe it was important to correct the reported position with respect to Australian real estate construction sector as soon as reliable information was available," he said.
Please click here to view tables
For further information:
Brandon Phillips
Group Manager, External Relations
T 03 8641 3857
M 0419 369 058
Hany Messieh
Head of Investor Relations
T 03 8641 2312
M 0414 446 876
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