National Australia Bank Limited (ASX: NAB) has reported a growth of 7.1% in its Cash earnings for the first half of FY19. The group also reported a statutory profit of $2,694 million for H1 FY19, up 4.3% on the previous corresponding period (pcp).
In its half-year results, released on Wednesday (2 May 2019), the group informed about the customer-related remediation costs of $525 million relating to the half year period. These costs were prompted by the failures of NAB which affected its customers as highlighted by the Royal Commission. Now the group is trying to remediate its affected customers as soon as possible and as a precautionary measure, NAB has been trying to fix those issues which caused the failures so that they don’t happen again in the future. By this way, the group has a chance to earn back the trust of its customers. If remediation cost is excluded from the cash earnings, the cash earnings are broadly flat with 1H FY18. Out of 76 Royal Commission recommendations, NAB supports 72 and currently, 26 recommendations which are actionable by NAB are either completed or being implemented.
The group’s revenue was up 1% as compared to pcp, driven by Market share gains in SME (Small and Medium Enterprises) and home lending.
NAB Board has also declared an interim dividend of 83 cents per share as compared to the dividend of 99 cents per share in pcp, reflecting a decrease of 16%. The dividends have been reduced to partially underwrite the 1H19 dividend reinvestment plan. Moreover, the reduction in the dividends is providing greater flexibility to accommodate further regulatory change and additional earnings volatility. The dividend is having a Record date of 15 May 2019, Ex-Date of 14 May 2019 and Payment date of 3 July 2019.
The group’s Common Equity Tier 1 increased by 19 basis points (bps) to 10.4%. With stronger capital position, NAB believes that it is well positioned to exceed APRA’s ‘Unquestionably strong Capital’ benchmark by January 2020. Driven by the housing lending competition and product mix changes, the group’s Net interest Margin was down by 7 bps.
In line with the global trends, the outlook for the Australian economy has softened with economic growth forecasted to be below trend in 2019 and 2020.
In light of slow housing credit growth, slow economic growth, high regulatory change and increased community and customer expectation, NAB believes that it must execute with greater urgency, discipline and accountability.
At the time of writing, i.e., on 2 May 2019 AEST 1:08 PM, the stock of the company was trading at a price of A$25.620, down by 0.621% during the day’s trade with the market capitalisation of ~A$72.48 Bn. NAB has 52 weeks high price of $29.640 and 52 weeks low of $22.520 with an average volume of ~6,309,584. NAB’s stocks are trading at a PE ratio of 12.590x.
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