A record profit from the National Australia Bank and a higher dividend, supporting the bank’s go it alone strategy and trying to make itself different from its peers.
The NAB yesterday reported a 23.6% lift in full year profit to $5.22 billion for the 12 months to September 30 from $4.22 billion in the 2010 financial year.
Shareholders are enjoying the improvement: interim dividend was lifted 16c to 84c and the final was boosted 4c to 88c a share, making a total for the year of $1.72 a share, up 20c on the 2010 level.
NAB shares jumped 93c or 3.6% to $25.48.
News of an agreement in Europe also boosted the NAB’s shares and other financial stocks.
Cash profit, the banking industry’s preferred measure of profitability, rose 19.2% to $5.5 billion after cash earnings rose 17% in the second half thanks to another fall in bad debts and a sharp jump in mortgages written.
The $2.79 billion earned in the six months to September was also a record for the bank.
That rate of growth in mortgages was three times the rate of growth in home lending, according to the bank.
That means the NAB has taken market share from its competitors, such as Westpac and the ANZ, which will report their full year results next week.
The NAB’s net interest margin was steady at 2.25% (or 2.25c in the dollar), but rose in the second half to 2.28% from 2.23%.
Much of that was due to the large increase last November (on top of the 0.25% increase from the RBA).
Yesterday the bank and CEO Cameron Clyne were circumspect about the size of any rate cut should the Reserve Bank cut the cash rate from 4.75% at next Tuesday’s board meeting.
NAB said its Tier 1 capital position rose to 9.7% from 8.91% and safely above the emerging international standard that regulators want to see.
Helping the improvement was a $441 million fall in the charge for bad and doubtful debts which fell to $1.8 billion. That reflected lower charges in personal, the UK, New Zealand and specialised group assets (those dud securities such as collaterised debt obligations bought before the GFC and still being run down by the bank).
NAB said cash earnings at its wholesale banking and MLC & NAB Wealth divisions declined because of weak and volatile markets, while NAB’s New Zealand and UK divisions both increased cash earnings.
Revenue jumped a solid 5.7% to a record $17.6 billion, but the increase in costs was held to just 1.4% (giving a cost to income ratio of 43.7%), allowing the bank to boost profit margins, even though the net interest margin was steady over the year.
Mr Clyne said in the statement that the latest profit followed efforts to reposition the retail banking business over the past two years.
"NAB has delivered good growth in earnings and revenue and carefully managed costs. In a challenging environment, the balance sheet and capital positions have been strengthened,” Mr Clyne said.
Personal banking cash earnings jumped 25.4% to $932 million, reflecting those higher home lending volumes.
Business banking earnings were up 11.5% to $2.4 billion, extending its market leading position in what has always been its core business.
Unlike the solid result from NAB, leading retailer Woolworths has revealed another very mixed quarterly sales update, this time for the 14 weeks to October 2.
While the group reported a 4.9% rise in top line sales to $14.597 billion compared with $13.91 billion for the first quarter of the 2011 financial year, there were a couple of key misses revealed in the report to the ASX yesterday.
And comparing the Woolies performance with that reported by Wesfarmers earlier this month for Coles Group, it’s clear the latter continues to outperform its larger rival.
Woolies general merchandise division, which includes discretionary retailers, led the poor performance with a 1.6% fall in quarterly sales to $1.522 billion, dominated by another poor quarter at Big W which saw sales fall 2.7% (to $1,037 million) on a top line basis and a large 4.2% on a comparable store (or same store) basis.
And while the group saw a 4.4% rise in top line sales in its vital Australian food and liquor sales for the quarter (to $9.7 billion), comparable store sales were up only 1.9% (compared with 2% a year ago) and missed analyst forecasts.
Woolies shares fell 8c to $24.07.
When it released its full year results in late August, Woolworths warned there were no signs of a recovery in consumer spending and tough conditions would crimp profit growth in 2012.
Woolworths has said net profit growth would be limited to between 2% and 6% in the 2012 financial year and judging by yesterday’s report, new CEO Grant O’Brien has a lot to do.
In his comment yesterday, Mr O’Brien was upbeat saying, “It was a solid start to the year considering retail conditions remain challenging”.
“The retail sector continues to be impacted by a lack of consumer confidence which means we have to work harder for every dollar.
"General merchandise is particularly affected, especially when combined with the
