Australia's NAB profits down 43 pct on bad debts

October 28, 2009 04:48:29 PM

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Australia's biggest lender National Australia Bank (NAB) reported a 43 percent fall in annual profits to 2.6 billion dollars (2.4 billion US) Tuesday as bad debts hit its bottom line in the global credit crunch.

Bad and doubtful debts rose from 2.49 billion dollars to 3.82 billion dollars as the world economic climate deteriorated, wiping 1.9 percent off cash earnings of 3.8 billion dollars, the bank said.

But the 2.6 billion net profit was underpinned by an 8.9 percent increase in revenue to 17.7 billion dollars, which chief executive Cameron Clyne lauded as a "solid result".

"In a weak economic environment when confidence levels within financial markets were still fragile we had to strike a careful balance between the various expectations of our shareholders, customers and the community," said NAB chief executive Cameron Clyne.

"This is a solid result based on revenue growth and continued good cost control."

Bad debts moderated in the second half and Clyne said there were signs the global economy was starting to stabilise, with growing consumer and investor confidence and lower-than-expected unemployment.

Optimism was returning particularly in Britain, which Clyne said had the highest proportion of loan arrears of all NAB's businesses for the year.

"(There are) some signs that we've reached a bottom in the UK," he said.

"We're a little bit more optimistic about the UK outlook ... There are a number of positive signs but you also need to be somewhat cautious," he added.

Write-offs came in at expectations, while revenues exceeded forecasts with "in line or better results across most of the key banking metrics," said IG Markets analyst Ben Potter.

"With this solid bottom-of-the-cycle earnings result, the near to medium term prospects for sustainable growth look robust and we would expect some upwards revisions to price targets," said Potter.

The bank declared a final dividend of 73 cents, down from 97 cents a year earlier.