ASX Announcement - NAB Australian Region market update

Thursday 15 May 2008

National Australia Bank Executive Director and CEO Australia, Ahmed Fahour, will be conducting market briefings following the release of the NAB half year results last week.

The briefing materials are attached and are based on the information disclosed during the half year profit announcement.

"NAB's Australian region results for the half year are typified by a combination of double digit revenue growth and flat costs. This produced strong cash earnings in both our banking and wealth management businesses," Mr Fahour said.

"Additionally we have continued to invest in our business while absorbing about half of the increased cost of funds flowing from the difficult global credit market conditions," he said.

"Over the past 12 months we have also launched a series of fee-free banking products for our customers, including our Smart Banking and Clear products, and the award-winning fee-free Concession Account product", Mr Fahour said.

Australian Region Financial Performance

Cash earnings growth of 17.1% from the banking and MLC businesses was driven by 10.6% revenue growth and flat expenses. This was achieved in a difficult market with higher wholesale funding costs and one large business lending specific provision.

Cost control remains a key focus. Absolute costs are lower in the first half of the 2008 financial year compared with the September 2005 half, when the program began.

NAB's efficiency, quality and service program has delivered cumulative cost benefits since the program began in October 2005 in excess of $300 million.

Banking (nab)

Banking revenue increased by 11.4%, expense growth was 0.1% and cash earnings rose $197 million or 16.8% to $1.4 billion, due to strong growth in retail deposits, transaction banking and business lending.

Efficiency and productivity initiatives reduced the banking cost to income ratio to 42.6% in the March half, down from 47.4% for the prior corresponding period. The cost to income ratio is now the lowest of the four major banks and has fallen from 54.3% or 1,170 basis points since the program began.
The Business and Private bank is the market leader in providing business banking services to Australian business and continues to be a significant growth driver with revenue up 14.8%. Cash earnings increased 18.2% to $948 million.

Retail banking has maintained a focus on deposit growth in the half and, as a result, NAB deposit market share increased from 14.3% in March 2007 to 14.7% in March 2008. The Retail distribution strategy is on track, delivering increased branch sales capability with home loan sales expertise in 85 per cent of our stores. Revenue growth is up 6.4% to $1.5 billion. Cash earnings increased 13.9% to $419 million.

Wealth Management (MLC)

MLC has delivered a 20.2% increase in cash earnings before income on retained earnings (IoRE) over the prior comparative period. MLC's efficiency program delivered a decrease in operating expenses of 5.6% enabling continued reinvestment in the business.

NAB Financial Planning is well positioned in the retail, business and private banks, with sales continuing to grow despite challenging market conditions. Adviser numbers in the bank are up by 31 to 525 during the half. MLC's aligned advice businesses (Garvan, MLC, Apogee and Godfrey Pembroke) also grew, adding 34 new advisers during the half.

MLC Investments continued to perform well in a difficult equity market with a strong focus on high value segment sales, and delivered 16.8% cash earnings growth. MLC Insurance was ranked no. 1 in retail risk premium market share. Revenue increased 12.2% and cash earnings were up 25%.

For further information:

Media
Brandon Phillips
M: +61 (0) 419 369 058

Investor Relations
Hany Messieh
M: +61 (0) 414 446 876

You can download the NAB Australia Region Market Update Presentation in pdf format.