National Australia Bank Limited · ASX:NAB
National Australia Bank — FY2003 Earnings Presentation
43 slides from National Australia Bank's earnings presentation, Nov 11, 2003
Slide 1: Full Year Results 2003
Full Year Results 2003 Frank Cicutto, Managing Director and CEO Richard McKinnon, Chief Financial Officer November 11, 2003 nabgroup.com Vk National
Slide 2: Agenda
Agenda Overview and Highlights Frank Cicutto— Strategy & Outlook - Frank Cicutto National
Slide 3: Overview
Overview Targets achieved - record cash earnings ® 8.2% EPS growth after currency and pensions impact Strong retail banking results in Australia and New Zealand Wealth Management operating profit up 28 % Corporate and Institutional solid result driven by strong client business Asset quality improves
Slide 4: Strategy & Outlook - Frank Cicutto
Strategy & Outlook - Frank Cicutto National
Slide 5: Ongoing operations drive record profit
Ongoing operations drive record profit = 10.2% CAGR Cash earnings from ongoing operations = 9.4% CAGR Net Profit after significant items $m 4500 4000 3500 3000 2500 2000 1500 Sep 99 Sep 00 Sep 01 Sep 02 Sep 03 wm Cash earings from a Net profit after ongoing operations significant items % National
Slide 6: Solid cash earnings growth from ongoing operations
Solid cash earnings growth from ongoing operations ® Cash earnings growth from ongoing operations up 11.0% before pensions and currency impact ® Pensions and foreign exchange movements reduce cash earnings by 2.9% 11.0% FSA FSE FSNZ CIB WM Other 65% 59% 12.7% 6.2% 30.5% Large Sep 02 adjusted Sep 03
Slide 7: Banking cash earnings drives the result
Banking cash earnings drives the result ® Cash earnings up 6.5% ® Cash earnings up 9.6% before pensions and currency impact Nil 45% Oll OE! 11.7% Expenses B&DD Tax 65% 0.2% 4.2% Sep 02 adjusted Sep 03 Sep 03 National
Slide 8: Strong volumes drive net interest income
Strong volumes drive net interest income Banking Net interest income Volume / margin contribution $B 75 6.5 5.5 45 3.5 3.0 | Volume Margin Sep 02 Sep 03 * excluding currency impacts National
Slide 9: Strong volumes drive net interest income
Strong volumes drive net interest income Growth September 2002 to September 2003 Gross loans and advances 7% 3% Housing 7% Term loans 8% Retail banking deposits Hf Growth from September 2002 & Growth from September 2002 excluding currency impacts National
Slide 10: Strong volumes drive net interest income
Strong volumes drive net interest income Group margin analysis Retail CIB Banking Other (0.11%) (0.08%) 0.05% Sep 02 Sep 03 National
Slide 11: Strong Banking other operating income growth
Strong Banking other operating income growth $B 45 Up 11.7%" | 4.0 | nl 3.5 3.0 Sep 02 Sep 03 * excludes currency impacts Loan fees Money Transfer fees Fees and commissions Trading income @Large $M 500 1,000 1,500 Other income H Sep 02 fi Growth on Sep 02 excluding currency impacts % National
Slide 12: Banking expenses up 5%
Banking expenses up 5% = Modest growth in personnel and occupancy costs ® Large increase in FSE pension expenses contributes 1.2% to growth ® Increasing compliance expense ® Non-core adds 2.0% Pensions* FX 1.7% Sep 02 ics Sep 03 * FSE pension costs National
Slide 13: Non-core expenses
Non-core expenses ® |mpact of IFRS and Basel Il on ISI Program - Bank Analyser to replace SEM Banking - Write down $ 40 million ® UK related $41 million - EMU write off expense - Acquisition due diligence - DLC development - Funding structures ® Other - $26 million - reclassification - $19 million -
Slide 14: Positioning for Growth FTE targets achieved
Positioning for Growth FTE targets achieved $m 580 No. 500 370 2,040 400 + me 2,000 300 470 2,033 200 31 1,000 100 Restructuring Annualised © + NetFTE expense savings reductions Mi Progress to Sep 03 v2 Balance remaining National
Slide 15: Ongoing productivity improvement
Ongoing productivity improvement Banking Cash earnings per average FTE 125 A $000s 100 50 Sep 01 Sep 02 Sep 03 Financial Services Europe 35 Cash earnings per FTE £000s 30 25 15 Sep 01 Sep 02 Sep 03 Financial Services Australia Cash earnings per FTE 125 A $000s 100 7 50 Sep 01 Sep 02 Sep 03 Financial
Slide 16: Delinquency rates remain stable
Delinquency rates remain stable Group 90 day delinquency 2.5% © 2.0% - 1.5% © 1.0% - 0.5% - Home Credit Personal Total loans cards loans wa Mar 02 @i Mar 03 ™ Sep 02 [3 Sep 03 National
Slide 17: Quality of broker originated loans is sound
Quality of broker originated loans is sound Housing portfolio composition 13% { NAB originated @ Broker originated ~ 87% Housing - new business flows for last 6 months * Volume growth is strong in both channels * Retail channel has grown at 17% vs system growth of 20% in last year * Broker channel i
Slide 18: Risk profile for inner city apartments acceptable
Risk profile for inner city apartments acceptable Housing portfolio segmentation for Australia = Recently completed a comprehensive review of this segment of the portfolio ® This includes the CBD and surrounding postcodes * Tighter credit criteria for this lending [] Owner occupier housing g_siInves
Slide 19: Active management of non-accrual loans
Active management of non-accrual loans Gross non-accrual loans $m $m 2.0% 3000 4500 FX translation 1.5% adjustment 2500 1000 4.0% 17% (636) Bt 500 0.5% (0.51% 1500 — Written ml . off | Sep Sep Sep Sep Sep Sep Sep Sep Returned to 96 97 98 99 00 01 02 03 500 performing or repaid @% Gross NALs -_ vom,
Slide 20: Asset quality — ratings improved
Asset quality — ratings improved Percentage of balance 50% 40% 30% 20% 10% 0% Business banking rating distribution ate ee AAAto BBBto BBtto BB- NAL BBB+ BBB- BB ccc Misep 02 © Sep 03 66% 62% 58% 54% 50% \* 65% 60% 55% 50% 45% 40% 44 Financial Services Australia business - CRS 1-7 Sep 01 Sep 02 Sep 0
Slide 21: Asset quality — improved security position in Business Banking
Asset quality — improved security position in Business Banking Business Secured lending* % of balance 65% 60% .. . 55% : 50% “lll 40% Dec 01 Sep 02 Sep 03 * Category A & B lending where security is > 100% of the facility National
Slide 22: Coverage ratios remains sound
Coverage ratios remains sound 200% 175% 150% 125% 100% 15% 50% 25% 0% "4 Total Provision to Impaired Assets Specific Provision to Impaired Assets — Sep97 Sep98 Sep99 Sep00 Sep01 Sep02 Sep03 % National
Slide 23: Strong provisioning adequacy through the cycle 1997 - 2003
Strong provisioning adequacy through the cycle 1997 - 2003 Mi Average net write offs 1 Average net write offs 700 i Average P&L charge @ Average P&L charge $m 9 600 114% 500 400 97 % 300 200 100 Se National Australia Bank Average Other MTBs (ANZ, CBA, WBC) % = Average charge / average net write offs
Slide 24: Frank Cicutto
Frank Cicutto “Overview and Highlights Strategy & Outlook - Frank Cicutto National
Slide 25: Financial Services Australia excellent underlying performance
Financial Services Australia excellent underlying performance $m 425% $m B&DD charges 3000 500 2600 400 2200 300 , Single account { 1800 200 1400 100 LD 1000 4 : 0 | Sep 01 Sep 02 Sep03 Sep 01 Sep 02 Sep 03 Hi Underlying profit © Cash earnings after tax ® Cost to income ratio improved ® Asset qualit
Slide 26: Financial Services Australia - Modest margin contraction at product level
Financial Services Australia - Modest margin contraction at product level Portfolio 3.60% changes ; Capital 3.40% 16 bps impact —Interestrate Product environment j vote margins : 3 bps 3.00% 2.80% 2.60% Sep 02 Sep 03 National
Slide 27: Financial Services Australia — Strong volume growth in line with system
Financial Services Australia — Strong volume growth in line with system Volume increase from 02 to 03 Deposits Personal Credit ™ Strong volume growth across all Business products Housing 20% 5% 10% 15% 20% 25% ™ Market share stable Share of wallet Sep 03 ™ Hold #1 position in share of wallet* for al
Slide 28: Financial Services Europe results in line with expectations
Financial Services Europe results in line with expectations Cash earnings after tax £m 400 28% Growth. Cash eamings up 5.9% on — 9% Sep 02 excluding pension fund Growth expense ® Deposits up 6.9% = Cost to income ratio 49.1%, (excluding pension fund expense) ® Asset quality improved - NALs/ Loans to
Slide 29: Financial Services New Zealand solid growth and market share increases
Financial Services New Zealand solid aqrowth and market share increases Cash earnings after tax ® Growth in housing 18% against 400 market 14% Nz$m 12.7% Growth * Total income up 9.6% 300 ® Cost to income ratio 50.3%, j 0 200 improved from 53.3% ® Asset quality sound — 100 NALs/ Loans to 0.12% 0 ® S
Slide 30: Corporate & Institutional Banking strong growth in customer-related banking
Corporate & Institutional Banking strong growth in customer-related banking $m 1000 800 600 400 Cash earnings after tax 6.2% Growth * * Strong growth in client based revenue ® Decline in Money Markets income = 91.4% of exposures are investment grade or above = Margin decline largely due to change in
Slide 31: Focus on core client relationships
Focus on core client relationships ® Client based banking income up 14% excluding currency impacts (11% in A$) Income Sep 02 Sep03 Sep02 Sep 03 Sep02 Sep03 Sep 02 Sep 03 Total Client Income Risk & Client Income - Banking Trading - Custody % National
Slide 32: Wealth Management cash earnings up 28%
Wealth Management cash earnings up 28% Cash earnings after tax $m 28.1% _ 400 Growth * Growth in life company profit # Stable disability claims experience 300 # Recovery in investment earnings # Investor sentiment recovering 200 100 Sep 01 Sep 02 Sep 03 Comparatives are before significant items % Na
Slide 33: Wealth Management drivers
Wealth Management drivers Total funds under management Australian retail risk business $Bn $M 75. 400 14.8% 0 350 14.4% 65 300 14.0% 60 55 | 250 ; 13.6% 0 200 13.2% Mar02 Sep02 Mar03 Sep 03 Jun Sep Dec Mar — Jun 02.~—(02 02 03 03 ©) Spot FUM —— AveFUM Hi In-force annual premiums === Market share % N
Slide 34: Committed to ongoing active capital management
Committed to ongoing active capital management * Comfortable managing capital levels to lower end of ACE target range ™ Change to ACE has no impact on ongoing capital generation ™ Regulatory ratios have been aligned to ACE target 9 7 10.2 10.2 10 Tar 3 Targets Ranges ) Sep 03 ACE/RWA 4.75 ~5.25..| 4
Slide 35: Dividend increases 10.9%
Dividend increases 10.9% cents per Dividend Growth share Payout 170 ™ Final dividend of 83 cents per 460 61% share, franked to 100% 140 ™ Total dividend of 163 cents per on 5% share, franked to 100% is 57% — Consistent dividend growth . 55% — 9.8% CAGR over last 5 years ee eee : 53% 1998 1999 2000 2
Slide 36: Strong result — well positioned
Strong result — well positioned Cash EPS growth 8.2% Return on equity 18.3% Net interest margin 2.5% Cost / Income ratio (Banking) 48.4% Non-accrual loans / gross loans 0.5% Provisions / gross impaired assets 163.4% ACE/RWA 5.0% Core Tier. 6.4% % National
Slide 37: Overview and Highlights - Frank Cicutto
Overview and Highlights - Frank Cicutto Financial Overview —-__- Richard McKinnon - Group Result - Divisional Results - SOUS National
Slide 38: Our strategy plays to our strengths
Our strategy plays to our strengths ‘Our Purpose: “Growth through excellent relationships” Our Vision: We will be a leading international financial services ‘company __ which is trusted by you and renowned for getting itright = Strategic Pillars: Deliver solutions that help meet customer’s complete
Slide 39: We have executed against our strategy
We have executed against our strategy Established position in wealth management Narrowed geographic focus * Exited the United Sates * Focus on UK and Ireland * Consolidated position in Australia and New Zealand * Investment in distribution platforms - growth in market share Improved efficiency * Ach
Slide 40: UK provides good growth opportunities but we have work to do
UK provides good growth opportunities but we have work to do Platform for growth * Solid starting base * Ability to take advantage of international scale * Ability to use offshore experience and capability The right people Priorities for organic strategy * Efficiency - Integration and standardising
Slide 41: Progress on efficiency and growth initiatives
Progress on efficiency and growth initiatives Merging Clydesdale and Yorkshire legal entities * Important step in creating one integrated bank in UK and Ireland - completion 04 * Retaining brands Converging Clydesdale and Yorkshire technology platforms * New front end platform for Yorkshire Bank in
Slide 42: Outlook
Outlook * Economic outlook is positive * Financial Services Europe earnings will be impacted by reinvestment, higher pensions costs * Expect the remainder of our businesses to continue producing solid results in the next 12 months * Remain confident in strength of our businesses * Will continue to p
Slide 43: Vi National
Vi National www.nabgroup.com
National Australia Bank — FY2003 Earnings Presentation on 6ix