NAB profits plunge 16%

The UK units of National Australia Bank Ltd have become a pox on the Australian bank’s operations.

NAB, one of Australia’s four largest banks, reported an unaudited net profit for the six months to March 31 of US$2.14 billion, down 16% year-on- year. The profit plunge comes after the bank booked writedowns and restructuring costs worth a combined US$740 million at its struggling UK division.

Acquired by NAB 20 years ago, the Clydesdale Bank and Yorkshire Bank have become a drag on its earnings due to flagging economic growth in the UK.

NAB Chief Executive Cameron Clyne said there has been a significant downgrade in the growth prospects of the UK economy in the last six months.

"In addition, the commercial property market, which had previously seen signs of recovery, has recently experienced a 'double dip' as the recovery stalls and other banks accelerate the reduction in their commercial real-estate exposures," Clyne said.

As a remedy, NAB said it will simplify the business to focus on retail and small-business lending in Scotland and Northern England. It is also considering whether to sell its two UK banks or strengthen its British operations with acquisitions.

NAB, based in Melbourne, is one of the four largest financial institutions in Australia in terms of market capitalisation and customers. NAB is ranked 17th largest bank in the world in market capitalisation.

It operates in 10 countries and serves over 8 million consumer and business banking customers and over 2.3 million wealth management customers.