Nab To Release Accounts Early

The Age

Friday October 17, 2008

Eric Johnston, Financial Services Editor

NATIONAL Australia Bank is seeking to head off doubts about its health by rushing forward the release of its accounts, which will show an 11% drop in annual earnings, by two weeks.

The highly unusual move comes as the bank looks to get in ahead of its rivals as part of efforts to raise up to $2.5 billion to bolster its balance sheet through a series of soft capital raisings, including a hybrid share issue.

The early release of its accounts, which will now take place on Tuesday, was also regarded by some as smoothing the way for NAB to make a renewed offer for Suncorp-Metway's banking and wealth management operations.

NAB has expressed interest in the $6 billion operation in recent weeks, although Suncorp has since called off sales talks.

However, the banking giant yesterday insisted the move was aimed at providing certainty to the market in the face of "extreme levels of volatility". Nor did it foreshadow any proposed material announcement, NAB said in a statement.

NAB yesterday said its cash earnings, a measure that strips out volatile investment market returns, would be about $3.9billion for the year ending September 30.

While this is in line with the average of analyst estimates, it is a drop from last year's $4.39 billion full-year profit.

Its planned final dividend of 97 a share will be flat on its interim dividend.

The earnings fall follows NAB taking more than $1 billion in write-downs on holdings of asset-backed securities linked to the US housing market. Meanwhile the bank has been forced to top up provisioning against several soured loans.

The latest result comes in one of the toughest environment for banks for nearly two decades. High funding costs are eating away at margins while bad debts have been rising.

Even with recent interest rate cuts, credit growth is expected to slow from the double-digit growth rates of recent years.

The bank said its tier-one ratio - a measure of its capital strength - would be "clearly above 7%". This will be up from the 6.7% reported during the first half.

Still, the bank said it was planning to boost its capital reserves further given "ongoing economic uncertainty".

This will be pursued through what is regarded as soft capital raisings, that is a dividend underwriting program and a hybrid share issue.

Analysts, including Deutsche Bank's Ross Brown, said these measures could push NAB's tier-one ratio to about 8% over the next year, giving it one of the highest ratings among its rivals.

Banks around the world have been trying to bolster their capital reserves as part of efforts to lower risk and soothe nervous investors. ANZ has already raised more than $1billion through a hybrid share issue while CBA last week raised $2 billion to help fund its BankWest acquisition.

Traditionally the last of the big banks to report its results, NAB had scheduled the release for October 31.

ANZ still expects to release its results next Thursday while the smaller St George will hand down its accounts on October 29 and Westpac a day later.

The early delivery of accounts is extremely unusual. In late 2005, Westpac was forced to release its full-year accounts a day early after some figures had been inadvertently emailed to analysts.

NAB's guidance has been issued ahead of the bank's board and its auditors signing off on its accounts. NAB shares fell 4.3% to $22.70 yesterday.

KEY POINTS

Banking giant insists the unusual move aims to provide certainty to the market.

NAB does not foreshadow any proposed material announcement.