National Australia Bank Limited · ASX:NAB
National Australia Bank — Investor Presentation (April 2012)
27 slides from National Australia Bank's investor presentation, Apr 30, 2012
Slide 1: UK Banking Strategic Review Investor Presentation
For personal use only 30 April 2012 Cameron Clyne, Group Chief Executive Officer David Thorburn, CEO United Kingdom Mark Joiner, Executive Director Finance National Australia Bank Limited ABN 12 004 044 937
Slide 2: Only one option currently in shareholders' interests
Only one option currently in shareholders’ interests For personal use only Restructure Grow UK Outright Maintain to improve through sale status quo returns acquisition Simplifying around Listed UK banks Unacceptable High execution risk existing core has trading at 0.2-0.6x medium term More challengi
Slide 3: Overview
Overview Macro economic environment is fragile, with the UK economy For personal use only becoming weaker The need for Commercial real estate values starting to decline again change in the UK Higher funding costs due to three notch rating downgrade UK industry returns under considerable pressure Imp
Slide 4: UK economic recovery slower than 1930s
UK economic recovery slower than 1930s Quarterly real output path during Monthly consensus forecasts of 2012 For personal use only UK recessions1 GDP growth (% change)2 (%) (%) 106 4.0 104 Mid 1970s 3.0 102 Early 1990s 2.0 100 98 1.0 96 Early 1980s 0.0 94 March 2008 onwards 1930s -1.0 92 Consensus f
Slide 5: 'Double dip' in UK real-estate values
‘Double dip’ in UK real-estate values UK commercial property capital value For personal use only UK nominal property values Growth Oct 2011 to Feb 2012 (%) Index Index Shopping C - Rest of UK Commercial Residential Shopping C - London & South East Property Property Office Scotland 280 280 Office Mid
Slide 6: Ratings downgrade increases funding costs
Ratings downgrade increases funding costs For personal use only Clydesdale Bank plc funding costs since 2007 Funding cost over BoE rate (bps) 360 320 280 W h o le s a le 240 200 160 Liquidity Portfolio Costs 120 80 Wholesale Funding Costs 40 Customer Deposits Avg 3m LIBOR/Base Spread Sep 07 Mar 08 S
Slide 7: UK industry returns are under pressure
UK industry returns are under pressure For personal use only 2011 UK Banks’ RoATE UK Bank ROE targets Original target Revised target 10.9% 8.8% 7.9% Barclays 13% by 2013 13% over time 4.5% (3.3%) (6.7%) 12.5% - 14.5% 12.5% - 14.5% Lloyds Group by 2014 beyond 2014 HSBC Bank Santander Barclays Nationw
Slide 8: Implement simplified business model
Implement simplified business model For personal use only UK retail banking returns are Rationalise FSC footprint improved and superior to business Rationale Scotland Strong franchise in ‘heartlands’ of 13 FSCs Scotland and Northern England Current: 16 West East 14 FSCs 8 FSCs Focus around sound Ret
Slide 9: Transfer UK CRE assets to NAB and put into run off
Transfer UK CRE assets to NAB and put into run off For personal use only UK CRE run-off profile – contractual maturity1 UK Banking B&DDs (£bn) (£m) 7.0 282 253 6.0 85 5.0 183 145 164 151 4.0 145 3.0 126 95 56 48 197 2.0 108 69 95 97 1.0 57 - Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 2012 2013 2014 2
Slide 10: UK CRE provisioning increased
UK CRE provisioning increased For personal use only UK CRE impaired loan coverage Total UK CRE provision coverage – Mar 12 4.4% 23% 48% 2.5% 11.9% 14% 2.4% 7.5% 25% 11% 2.6% Spec Prov 1H12 Spec Prov Partial Im plied CRE Specific Collective UK CRE Total prov Partial Im plied coverage provisioning cov
Slide 11: Restructure improves CB balance sheet structure
Restructure improves CB balance sheet structure For personal use only March 2012 Actual (£bn) March 2012 Pro Forma (£bn) 43.6 43.6 Other 1 5.2 Other 8.0 37.9 37.9 Liquid assets 6.3 Other 1 5.7 Total equity Other 8.0 3.1 Parent Liquid assets 6.3 Total equity 7.7 3.1 Parent 2.0 Business 17.5 lending B
Slide 12: Costs and benefits profile
Costs and benefits profile Expect to book redundancy For personal use only Total costs and impact on Group capital ratio (pre tax) costs in 2H12 £m Total 1H12 2H12 Group capital Planned FTE reduction by £m $m bps September 2015 of over 1400 Redundancy 86 - 86 (86) (131) (4) from September 2011 inclu
Slide 13: UK Banking 1H12 unaudited financial results
UK Banking 1H12 unaudited financial results Half year to For personal use only Change Change (£m) Mar 12 Sep 11 Mar 11 on Sep 11 on Mar 11 Net interest income 450 491 481 (8.4%) (6.4%) Other operating income 142 153 134 (7.2%) 6.0% Net operating income 592 644 615 (8.1%) (3.7%) Operating expenses (3
Slide 14: UK 1H12 pro forma unaudited results
UK 1H12 pro forma unaudited results For personal use only 1H12 Portfolio Restructuring 1H12 Other Reported trs to NAB costs Pro forma Cash earnings (£m) (25) 125 - - 100 Cash RoRWAs (16bps) 92bps 76bps CB Tier 1 ratio 10.3% 240bps (53bps) (89bps) 11.3% CB SFI 97% 18% - - 115% CB Assets £43.6bn (£5.7
Slide 15: Other issues – Payment Protection Insurance (PPI)
Other issues – Payment Protection Insurance (PPI) For personal use only CB plc raised £100m provision bringing CB PLC claims experience by month the balance to £120m in May 2011 following the BBA’s withdrawal from the judicial review process £71m of provision utilised since it was raised Claims expe
Slide 16: Other issues – goodwill and pension plan
Other issues – goodwill and pension plan For personal use only Goodwill impairment charge of £141m reflects weaker operating environment and outcome of UK strategic review – No impact on regulatory capital – No UK goodwill remaining Defined benefits pension plan reformed during the half year – Pensi
Slide 17: Conclusions
Conclusions For personal use only Economic environment expected to remain challenging for longer CRE provisioning coverage improved and portfolio in run-off Repositioned to a simplified and lower risk retail/SME oriented business model Improved CB balance sheet structure – improved capital position
Slide 18: Appendix
For personal use only 18 Appendix
Slide 19: UK Banking
UK Banking For personal use only Business lending Personal lending Retail deposits (£bn) (£bn) (£bn) (1.1%) 0.0% 0.0% (1.3%) 0.7% 4.1% 3.3% (0.4%) 3.9% 18.1 17.9 17.9 17.9 15.3 15.8 14.6 14.7 6.8 6.5 6.3 6.1 1.7 1.5 2.0 1.8 23.7 23.4 23.3 24.2 12.6 12.9 13.6 14.3 11.3 11.4 11.6 11.8 Sep 10 Mar 11 Se
Slide 20: Funding mix
Funding mix For personal use only Stable funding index 105.3% 96.7% 97.1% 93.8% 20.1% 11.8% 9.9% 11.9% 73% 75% 70% 71% 85.2% 81.9% 84.9% 87.2% Sep 10 Mar 11 Sep 11 Mar 12 CFI TFI Retail cover ratio Stable funding index (SFI) based on spot balances 20
Slide 21: UK Banking: Other operating income and expenses
UK Banking: Other operating income and expenses March 12 v March 11 March 12 v September 11 For personal use only Other operating income Other operating income (£m) (£m) 8 (14) 14 (4) (2) (5) 142 153 134 142 Mar 11 PPI Refunds Fees and Other Mar 12 Sep 11 Profit Share Fees and Other Mar 12 in prior
Slide 22: UK Banking: Asset quality
UK Banking: Asset quality For personal use only Total 90+ DPD as a % of GLAs Coverage ratio (£m) (%) 350 1.2% 2.5 300 1.0% 2.0 250 0.8% 200 1.5 0.6% 150 1.0 100 0.4% 50 0.2% 0.5 0 0.0% 0.0 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12
Slide 23: UK Banking: Asset quality
UK Banking: Asset quality For personal use only Gross impaired assets 90+ DPD and GIAs as a % of GLAs (£m) (%) 3.44 3.68 1,000 3.0% 2.98 3.15 3.12 0.79 2.5% 2.60 0.80 800 0.81 0.57 2.0% 0.89 600 0.85 1.5% 400 2.89 1.0% 2.34 2.64 2.55 200 1.75 2.09 0.5% 0 0.0% Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 1
Slide 24: UK portfolio composition
UK portfolio composition For personal use only March 2012 Total portfolio composition Gross Loans & Acceptances £33.5bn 100% Mortgages 44% Business Lending Mortgages Unsecured £17.5bn £14.6bn £1.4bn £33.5 bn 52% 44% 4% Business Non 52% Commercial Property Residential Property IHL PL Cards Other £6.0
Slide 25: Commercial Real Estate - UK Banking
Commercial Real Estate - UK Banking Total £6.0bn For personal use only 17.8% of Gross Loans & Acceptances Region North East South West Total Location % 28% 29% 16% 27% 100% Loan Balance < £2m 14% 13% 8% 14% 49% R e s ide nt ia l 3 7 % Loan Balance > £2m < £5m 6% 6% 3% 6% 21% Loan Balance > £5m 8% 10
Slide 26: UK Banking portfolio breakdown
UK Banking Portfolio breakdown – total £33.5bn For personal use only UK Mortgages Mar 12 Sep 11 Mar 11 Owner Occupied 79.7% 79.6% 79.6% Investment 20.3 % 20.4 % 20.4 % Low Document 0.0 % 0.0 % 0.0 % Mortgages Commercial 44% Proprietary 72.0 % 72.8 % 75.1 % Property 18% Third Party Introducer 28.0 %
Slide 27: Disclaimer
Disclaimer: This document is a presentation of general background information about the Group’s activities current at the date of the presentation, 30 April 2012. It is information in a summary form and does not purport to be complete. It is to be read in conjunction with the For personal use only N
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