National Australia Bank (ASX: NAB) reported an increase in cash earnings of 15.5% in FY15 and announced the sale of NAB’s Wealth Life insurance business for $2.4bn.
Cash earnings rose only 2.4% after accounting for conduct charges in its UK business. Nab posted a 19.7% higher statutory profit than the previous year. The bank reported Expenses fell 1% but after excluding the charges and foreign exchange rate impacts, they rose 4%. The higher expenses were due to the bank’s investment in priority consumer segments, increased technology costs, higher spending in UK combined with increase in wages.
The total charge for Bad and Doubtful Debts (B&DDs) was down approximately 5% due to lower charges in Australia and UK. The Group’s Common Equity Tier 1 (CET1) Ratio was 10.2%, higher than the regulatory requirement of 8.75%-9.25% range. The CET1 Ratio performance was due to the increase in mortgage risk weights from 2016 and an intended UK demerger. The bank also announced to distribute final dividend of 99 cents per share fully franked and unchanged from the 2015 interim dividend.
According to Nab Group CEO, “In 2015 we have been focused on delivering against our plan – driving improved performance in our Australian and New Zealand business, investing for growth, delivering significant technology milestones for our customers, building a stronger balance sheet and exiting our legacy and lower returning assets.”
The bank has also announced an agreement to sell 80% of Nab Wealth’s life insurance business to Nippon Life Insurance Company for $2.4 billion. It has also entered into an additional agreement with Nippon Life, wherein it will start a long term partnership with the company for 20 years. As part of this partnership, Nab will provide life insurance products through its owned and aligned distribution networks.
As part of the Group’s strategy to focus on the Australian and New Zealand franchise, it intends to divest CYBG PLC through a demerger and Initial Public Offering (IPO). The Group aims to pursue a demerger of approximately 75% of CYBG and the sell rest through an IPO to institutional investors. The company will have a primary listing on the London Stock Exchange (LSE) and a Depository Interest listing on the Australian Stock Exchange (ASX). This process is expected to start in February 2016.
Author: Matthew Dibb
Oct 28, 2015
Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.