National Australia Bank (ASX:NAB)
Historical Stock Chart
2 Years : From Dec 2011 to Dec 2013
National Australia Bank Ltd. (NAB.AU) released Monday an unaudited first-half profit figure down 16% on year after it booked writedowns and restructure charges at its struggling U.K. division worth a combined GBP456 million (A$709.6 million).
The Australian lender said it completed a strategic review of the U.K. assets and has decided to simplify the business to focus on retail and small-business lending in Scotland and Northern England. Most of its commercial real-estate portfolio will be transferred to National Australia Bank's balance sheet and allowed to go into run-off, it said in a statement.
Acquired by Australia's fourth-largest lender by market value over two decades ago, the Clydesdale and Yorkshire banks have become a blight on its earnings amid deteriorating economic conditions in the U.K.
National Australia Bank has also said its operations there need more scale to compete in the mature British banking market, and the lender has been mulling whether to sell the two banks or beef up its British operations with acquisitions. It was in the running to acquire more than 600 Lloyds branches last year but didn't submit a formal bid on price concerns.
There has been "a significant downgrade" in the growth prospects of the U.K. economy in the last six months, Chief Executive Cameron Clyne said in a statement.
"In addition, the commercial property market, which had previously seen signs of recovery, has recently experienced a 'double dip' as the recovery stalls and other banks accelerate the reduction in their commercial real-estate exposures," Clyne said.
Melbourne-based National Australia Bank said it will incur GBP195 million of restructuring costs, write off GBP141 million of goodwill from Clydesdale Bank, and book an additional GBP120 impairment charge due to increased protection insurance claims.
It said the moves are expected to deliver cost savings of about GBP74 million by 2015.
James Ellis, a banking analyst at Credit Suisse, said the outcome of the review isn't highly surprising and "in our view quite sensible and pragmatic."
Ellis said the bank has created a pathway to a more sustainable U.K. exposure and possible medium-term divestment, although he noted that the bank is still holding large risk exposures without additional group provisions.
The bank said Monday that it has transferred to the U.K. operations about A$230 million of the A$300 million collective provision economic overlay expensed in 2008 and 2009.
National Australia Bank reported an unaudited net profit for the six months to March 31 of A$2.05 billion, which it said is 15.6% below the previous corresponding period. Cash earnings--which smooth out one-off items--rose 5.7% to A$2.82 billion, it said.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; Ross.Kelly@dowjones.com