National Australia Bank reported that its full-year earnings are likely to fall as much as 14% due to write-downs and provisions to cover alleged misconduct by British unit.
Australias forth biggest bank by market value said that its cash earnings for the year ended September 30th are likely to be between AUD5.1 billion and AUD5.2 billion, hit by a nearly A$1-billion fall due to charges in the U.K. There is quite the difference compared with an average estimate of AUD6.2 billion from 16 analysts polled by Reuters and last years cash profit of AUD5.9 billion.
“Its clear this result is well down on expectations and on our plan,” said Andrew Thorburn, NABs CEO. “As our bonus pool is based on cash earnings and return on equity then we can also expect and know that bonus pool will also be reduced.” He also mentioned that write-downs and provisions would decrease the banks common equity tier 1 capital ratio by 33 basis points.
NABs British units, including Clydesdale Bank and Yorkshire Bank, are under heavy regulatory observations mostly because of customer claims of insurance and hedging products sold before the financial crisis. The Australian giant has decided to set aside a substantial amount of money for possible compensation. Earlier this year, the bank had agreed to sell $1 billion of non-performing U.K. commercial property loans to a private-equity firm, called Cerberus Global Investors. The bank had said that it will continue to sell non-core assets.
On a conference call, Mr. Thorburn, who was appointed as new acting CEO in August, reminded that every coin has two sides and the write-downs and the provisions allow management to turn more attention to NABs core Australian and New Zealand franchises, which despite the situation in the U.K., still put up good performance numbers.
This year the company will be paying a AUD0.99 dividend per share, a AUD0.02 increase compared to last year. NAB is due to release its full-year results on October 30th.
National Australia Bank Ltd closed at A$32.47 in Sydney on Thursday, marking a one-year change of -5.22%. The company is valued at AUD76.06 billion. According to the Financial Times, the 16 analysts offering 12-month price targets for have a median target of AUD35.62, with a high estimate of AUD39.50 and a low estimate of AUD32.00. The median estimate represents a 9.71% increase from the last price of AUD32.47.
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