Group Corporate Affairs 500 Bourke Street Melbourne Victoria 3000 AUSTRALIA www.nabgroup.com National Australia Bank Limited ABN 12 004 044 937 ASX Announcement Monday 17 November 2008
NAB Australian Region market update
National Australia Bank Executive Director and CEO Australia, Ahmed Fahour, is conducting a series of market briefings following the release of the NAB full year results on Tuesday 21 October. The briefing materials are attached and are largely based on the information disclosed during the full year results announcement. “NAB’s Australian Region continues to deliver excellent results in a challenging market, demonstrating increased revenue growth and a tight focus on cost control,” Mr Fahour said. “This is an outstanding achievement when viewed in the context of the external environment over the course of the year. “Throughout this difficult time NAB has continued to invest in our business by developing new brands such as UBank, extending our microfinance initiatives, delivering new products such as the Clear home loan, and commencing new infrastructure initiatives such as our Next Generation platform. “NAB has remained strong through these challenging conditions, and continues to focus on providing excellent support and service to our customers,” Mr Fahour said.
Australian Region Financial Performance The Australia Region delivered cash earnings growth (before IoRE) of 15.8% and underlying profit growth of 19.3% over the prior comparative period. Revenue growth of 10.1% was an excellent result achieved in a very challenging environment. The strong performance of cash earnings growth of 18.5% by the Australia Banking business reflects continued momentum in business lending and consumer deposit gathering. MLC delivered cash earnings growth of 1.5% and delivered an excellent insurance result, whilst the investments businesses were negatively impacted by the investment market downturn. The regional expense base decreased marginally over the prior comparative period, which is a standout result achieved in a 3 to 4% inflationary environment and within a competitive labour market. The cost base in 2008 has been held relatively flat for the last three years and stands lower than 2006. Bad and doubtful debt charges were up 55% reflecting the tightening in the credit environment and a slowdown in economic growth. The charge includes increases across the portfolio, with higher specific provisions generated across Business & Private Banking and in particular, the impairment of one large business client in the March 2008 half.
Significant work has been undertaken in the Australia Region to ensure risk associated with For personal use only use personal For the lending book is actively managed and priced appropriately. Asset quality is in good shape with 90 days past due stabilising and is flat on the first half of 2008. The Efficiency, Quality and Services program was central to the improvement in the banking cost to income ratio to 40.6% for the six months to September 2008 and has delivered over $300 million in benefits in the year to September 2008, bringing a cumulative total
sustainable benefit in excess of $500 million since the program began in 2005. The region remains committed to operating expenses remaining within the Australian inflation rate to 2010. NAB has committed to the first phase of its Next Generation Platform initiative that will replace the core banking systems over the next five years to underpin its strategy for sustainable out-performance. NAB’s strategic focus on specialised businesses concentrating on the needs of the customer, particularly in the core business banking area, demonstrated strong revenue and volume growth in areas such as health, ‘agri’ and education. NAB aims to better manage the needs of high net worth customers through the creation of the Private & Institutional Wealth division and has launched a specialised, low cost, high service direct bank to customers in the growing direct segment through the Star Direct & Alliances business. The first brand in NAB’s Star Direct & Alliances division, UBank, is a new direct channel and was launched in 2008 offering term deposits. Over time, a range of additional savings, transaction and investment products will be added. MLC continues to perform well in very difficult investment markets with underlying cash earnings of $408 million slightly ahead of the prior period. This result reflects the diversification of the MLC business model including a strong and growing insurance business, accompanied by the retail platform “MasterKey” which is supported by MLC's manager of manager’s investment process. MLC's advice networks continue to grow strongly as an outcome of the commitment to running a sustainable and transparent business model. A highlight of the MLC result is also expense control.
For further information: Media Investor Relations Brandon Phillips Nehemiah Richardson M: +61 (0) 419 369 058 M: +61 (0) 414 446 876
Felicity Glennie-Holmes Lyndal Kennedy M: +61 (0) 412 673 038 M: +61 (0) 400 983 038
Kerrina Lawrence Wendy Carter M: +61 (0) 417 034 738 M: +61 (0) 488 318 952
For personal use only use personal For
National Australia Bank Limited ABN 12 004 044 937 full year results
Australia Region Market Update September 2008 Results
Ahmed Fahour, Executive Director & CEO Australia
November 2008 For personal use only use personal For full year market update Contents 2008
X Overview
X Underlying results
X Sustainable Out-Performance Strategy For personal use only use personal For
1 full year market update Australia Region How we achieved this result 2008 Highlights*
X Net revenue of $9,357 million up 10.1% on PCP, costs at $4,047 million flat on PCP
X Underlying profit $5,310 million up 19.3% on PCP
X Cash earnings after tax^ $3,328 million up 15.8% on PCP
X Grew Region ROE in a difficult year
How we achieve this result
X Managed the market conditions; including higher funding costs and pressure on margins; with a focused
sales force emphasising deposits growth
X Continued to progress our Efficiency & Quality Services (EQS) agenda with $500m plus of cost savings
For personal use only use personal For since the program commenced
X Closely monitored underlying asset quality, with a flat B&DD expense 2H08 v 1H08
2 Source: Internal. * FY08 ongoing basis. ^ Cash earnings before IoRE includes Other (incl. Asia) full year market update Australia Region: Achieving Sustainable Results CAGR FY05 to 2FY08008 = Australia Region Half Yearly Cash Earnings ($m) 16.3% (before IoRE) 1,743* 100 1,585* 88 1,521* 95 87 125 1,353* 132 76 481 1,223* 75 107 1,118* 419 65 88 395 80 368 344 309 1,080 906 948 802 663 722
Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 For personal use only use personal For
Business & Private Banking Retail Banking Investments Insurance
Source: Internal, ongoing basis. CAGR, Compound Annual Growth Rate, FY05 Cash Earnings $2,118m. 3 * Including other (inc. Asia), Mar06=$1m; Sep06=$(6)m; Mar07=$0m; Sep07=$1m; Mar08=$(2)m; Sep08 $(6)m full year market update Australia Region: Cash earnings by business unit 2008
full year to ($AUDm) % Change
30 Sep 2008 30 Sep 2007
Region Cash Earnings (pre IoRE) 3,328 2,874 15.8%
Australia Banking 2,928 2,471 18.5%
Business & Private Banking 2,028 1,708 18.7%
Retail Banking 900 763 18.0%
MLC (pre IoRE) 408 402 1.5%
Insurance 195 163 19.6%
Investments 213 239 (10.9%) For personal use only use personal For
4 Source: Internal, ongoing basis. full year market update Australia Region: Revenue growth maintained, expenses well managed 2008
Revenue and expense trend Seeking sustainable out-performance $m 4,817 X Run existing businesses well 4,395 4,540 4,106 3,912 X Develop new distribution 3,672 3,719 opportunities in High Net Worth Private & Institutional Wealth (PIW) and branchless banking 2,051 2,052 2,025 2,023 2,014 2,036 1,996 (Star Direct & Alliances)
X Accelerate Efficiency, Quality & Sep 05 Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 Service (EQS) and Customer Revenue Expenses Experience & Effectiveness (CEE) programs Revenue growth less expense growth X Develop the Next Generation Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 technology platform Revenue/Expense 2.6% 5.3% 5.4% 5.9% 5.3% 3.3% Differential X Invest in people and skills (The
Academy) For personal use only use personal For
5 Source: Internal, ongoing basis. full year market update National Australia Bank: Is one of the most efficient major banks in the world 2008
Retail & Business Bank Cost to Income (%)
Banco Santander 40% Bank of America 41% NAB Australia 42% JP Morgan 42% Wachovia 45% Lloyds BB 45% Westpac 46% CBA 46% ANZ 46% TD Canada 52% RBC 52% HSBC 52% Citibank 52% Wells Fargo 54% Unicredit 54% Credit Agricole 55% CIBC 55% Scotiabank 56% For personal use only use personal For Barclays 56% BNP 61%
6 Source: BCG Benchmarking (Data is based on 2007 or 2008 accounts depending on entities end of financial period) full year market update Continuing to invest in the Region 2008 Australia Region investment cash spend
$180m $220m $241m $255m $168m $203m 100%
30% 37% 36% 36% 80% 44% 57%
60%
46% 40% 40% 42% 46% 30%
28%
20% 26% 21% 24% 24% 18% 15% 0% Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08
Compliance projects Infrastructure projects Efficiency/revenue generating projects
X 2008 annual spend of $371m
X Spend is skewed to the second half
X For personal use only use personal For Increasing percentage of portfolio focussed on revenue generation and efficiency related projects
7 Source: Internal, ongoing basis. full year market update Customer service & employee engagement 2008 Customer satisfaction Customer satisfaction
Retail Banking* Business & Private Banking**
67% 70% 71% 69% 6.35 6.07 5.61
Sep 05 Sep 06 Sep 07 Sep 08 Nov 07 Apr 08 Sep 08
Employee satisfaction Employee engagement
82% 74% 72% 81% 51% 53% 39% 40%
For personal use only use personal For Sep 05 Sep 06 Sep 07 Sep 08 Sep 05 Sep 06 Sep 07 Sep 08
Source: *Roy Morgan Research, Base: MFI Pop’n 14 years+, 6 month moving average. Satisfaction is based on customers who answered very or fairly satisfied. **East & Partners’ Business Banking Customer Satisfaction Monitor, covering businesses with annual turnover between $5m and $500m. Satisfaction is measured on a 8 scale of 0 - 10 with 0 = very dissatisfied and 10 = very satisfied full year market update Australia Region: Business unit focus on operational excellence 2008
Business & Private Banking Retail Banking MLC
X Strategy is centred around “Making X Expanding and reshaping distribution X Maintain focus on high quality Genuine Contact” with customers. In reach sustainable new Insurance particular: X Optimising outlets in high traffic business X Deepening relationships by growth areas X Continue to take the lead in providing valuable advice via local X Leveraging investment in ATM building trust and transparency in partnership model network the financial advice industry X Broadening services through X Continued investment in self- X Maintain a leading market share in specialist product knowledge service channels the rapidly growing superannuation bankers X Product and process simplification system X Ongoing process efficiency X Consistently deliver strong returns improvements releasing time for X Accelerated deposit gathering through MLC’s Manager of increased customer focus X Continued sales force effectiveness Manager investment approach X Strong focus on measuring, X Further leverage nab’s Australian X Focused segment growth monitoring and pricing for risk business X My Business X Maintain focus on improving X Investing in people efficiencies and capital X Targeted leadership, sales and X Premier Banking management credit skills training programs X Authentic coaching and
leadership For personal use only use personal For
9 full year market update Best Performing Major in Australia for 2008 2008
Australia Banking FY08 on Prior Year (%) 1 Wealth Management Full Year KPI’s 2
nab Bank1 Bank2 Bank3 MLC Bank1 Bank2 Bank3
Revenue growth % 12.3 6.3 9.9 10.7 Net Revenue growth (%) (2.3) 5.6 3.7 5.1
Expense growth % 1.4 4.3 6.3 8.1 Expense growth (%) (6.6) 2.1 8.7 6.2
Cash Earnings 18.5 8.7 9.9 11.9 Cash Earnings pre IoRE 1.5 13.3 (1.2) 3.7 growth (%) growth (%)
Cost to Income (%) 41.6 45.5 45.8 46.1 Funds Under Mgt 102.3 176.9 79.4 43.9 (Avg. $bn)
Annual Inforce 828 1,136 442 813
Premiums (Avg. $m) For personal use only use personal For
10 Source: Internal, ongoing basis. 1 UBS Peer Comparison, FY08E Snapshot , 2 Best available equivalent to “MLC”, full year market update Best Performing Major in Australia for 2007 2008
Australia Banking FY07 on Prior Year (%) 1 Wealth Management Full Year KPI’s 2
nab Bank1 Bank2 Bank3 MLC Bank1 Bank2 Bank3
Revenue growth % 10.9 7.4 6.2 6.0 Net Revenue growth (%) 14.5 18.2 14.8 15.6
Expense growth % (0.2) 2.3 2.8 3.6 Expense growth (%) 1.3 12.7 10.1 8.8
Cash Earnings 21.2 14.1 9.1 5.9 Cash Earnings pre IoRE 30.5 20.6 23.0 30.6 growth (%) growth (%)
Cost to Income (%) 56.7 52.5 50.8 55.2
Cost to Income (%) 46.0 46.4 47.4 47.2 For personal use only use personal For
Source: Internal, ongoing basis. 1 UBS Peer Comparison, FY07E Snapshot – Consumer & Business Banking, 2 Best available 11 equivalent to “MLC”, 3 APRA Banking Statistics – Banking & Financial System Report – 30th September 2007 full year market update Contents 2008
X Overview
X Underlying results
X Sustainable Out-Performance Strategy For personal use only use personal For
12 full year market update Australia Region: Strong underlying profit growth 2008
full year full year to ($m) to (%) Australia Region Sep 08 v ($m) Sep 08 Sep 07 Sep 07 Banking revenue 8,100 7,215 12.3 MLC net revenue 1,257 1,286 (2.3) Total Revenue 9,357 8,501 10.1 Operating Expenses (4,047) (4,050) 0.1 Underlying profit 5,310 4,451 19.3 Charge to provide for bad & doubtful debts (603) (389) (55.0) Other (incl. Asia) (8) 1 (large) Tax (1,371) (1,189) (15.3)
Cash Earnings before IoRE 3,328 2,874 15.8 For personal use only use personal For
13 Source: Internal, ongoing basis. full year market update Australia Region: P&L Success 2008 Aust. Region Revenue up 9.4% CAGR ($m) Aust. Region Expenses up 1.5% CAGR ($m) 10.1% 11.4% 9,357 4.5% 0.0% (0.1%) 6.9% 8,501 7,631 4,048 4,050 4,047 7,137 3,875
FY05 FY06 FY07 FY08 FY05 FY06 FY07 FY08
Aust. Region Cash Earnings up 16.3% CAGR ($m) Aust. Region CTI down 1100bps
15.8% 3,328 120bps 550bps 22.8% 2,874 54.3% 53.1% 10.5% 430bps 47.6% 2,341 43.3%
2,118 For personal use only use personal For
FY05 FY06 FY07 FY08 FY05 FY06 FY07 FY08
14 Source: Internal, ongoing basis CAGR: Compound Annual Growth Rate from FY05 to FY08 full year market update Australia Banking: Continuing to perform strongly 2008
full year full year to ($m) to (%)
Australia Banking Sep 08 v ($m) Sep 08 Sep 07 Sep 07
Net operating income 8,100 7,215 12.3 Operating expenses (3,366) (3,321) (1.4) Underlying profit 4,734 3,894 21.6 Charge to provide for bad & doubtful debts (603) (389) (55.0) Tax (1,203) (1,034) (16.3)
Cash Earnings before IoRE 2,928 2,471 18.5 For personal use only use personal For
15 Source: Internal, ongoing basis. full year market update Australia Banking: P&L Success 2008 Aust. Bank Revenue up 10.4% CAGR ($m) Aust. Bank Expenses up 2.1% CAGR ($m)
12.3% 10.9% 8,100 5.2% (0.2%) 1.4% 8.1% 7,215 3,162 3,328 3,321 3,366 6,508 6,021
FY05 FY06 FY07 FY08 FY05 FY06 FY07 FY08
Aust. Bank Cash Earnings up 17.4% CAGR ($m) Aust. Bank CTI down 1,090bps
18.5% 140bps 21.2% 52.5% 2,928 51.1% 510bps 12.5% 2,471 2,038 440bps 1,811 46.0%
41.6% For personal use only use personal For
FY05 FY06 FY07 FY08 FY05 FY06 FY07 FY08
16 Source: Internal, ongoing basis. full year market update Australia Banking: Net interest margin well managed 2008
Net Interest Margin - Full year (%)
2.42 2.41 2.41
FY06 FY07 FY08 For personal use only use personal For
17 Source: Internal, ongoing basis. full year market update Australia Banking Competitors FY08 2008 Revenue Growth on Prior Year (%) Expense Growth on Prior Year (%)
12.3% 8.1% 10.7% 9.9% 6.3% 6.3% 4.3%
1.4%
nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
Cost to Income (%) FY08 Cash Earnings Growth on Prior Year (%)
45.5% 45.8% 46.1% 18.5% 11.9% 9.9% 41.6% 8.7%
For personal use only use personal For nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
18 Source: Nab, internal - ongoing basis & Competitors, UBS Peer Comparison, FY08 Snapshot – Consumer & Business Banking full year market update Australia Banking Competitors FY07 2008 Revenue Growth on Prior Year (%) Expense Growth on Prior Year (%)
3.6% 10.9% 2.8% 2.3% 7.4% 6.2% 6.0%
(0.2%) nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
Cost to Income (%) FY08 Cash Earnings Growth on Prior Year (%) 47.4% 47.2% 21.2% 46.4% 14.1% 46.0% 9.1% 5.9%
For personal use only use personal For nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
19 Source: UBS Peer Comparison, FY07 Snapshot – Consumer & Business Banking full year market update Australia Banking Market Share FY08 2008
Business Lending * Home Loans
22.5% 19.9% 16.1% 17.4% 16.3% 13.5% 15.1% 14.1%
nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
Total Deposits Credit Cards
20.0% 21.5% 21.4% 20.5% 15.5%
14.9% 13.6% 14.1% For personal use only use personal For nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
20 Source: APRA Banking Statistics – Banking & Financial System Report – 30th September 2008 * Business Lending definition includes Institutional Markets & Services full year market update Australia Banking Market Share FY07 2008
Business Lending * Home Loans
23.4% 21.7% 14.9% 16.7% 15.8% 15.7% 13.0% 14.0%
nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
Total Deposits Credit Cards
17.6% 14.8% 22.6% 14.6% 13.5% 21.9% 20.3%
14.8% For personal use only use personal For nab Bank 1 Bank 2 Bank 3 nab Bank 1 Bank 2 Bank 3
Source: APRA Banking Statistics – Banking & Financial System Report – 30th September 2008 21 * Business Lending definition includes Institutional Markets and Services full year market update Australia Banking: Half year average volumes 2008
Business Deposits Housing X Strong lending Lending * growth in $bn $bn $bn 148 business SME 110 segment 99 92 X Deposit market 87 105 142 80 share gains 137 X Retail deposits 98 number 2 in the market 131 93 X BPA transaction banking performing strongly X Housing focus on profitable Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep channels
07 07 08 08 07 07 08 08 07 07 08 08 For personal use only use personal For
Source: Internal, ongoing basis. 22 * Mar 07 & Sep 07 business lending assets adjusted to remove $1bn classified as liquid assets in Mar 08 full year market update Australia Banking: Asset Quality remains strong 2008 Australia Banking Loan Loss Provisions to Australia Banking Gross Loans & Acceptances Defaulted & Impaired Asset Rates 1,400 0.60% 0.37% 0.39% 1,200 0.18% 0.23% 0.29% 1,000 0.50% 0.21% 800 0.40% 600 0.44% 0.40% 0.36% 0.41% 0.41% 0.33% 400 0.30% 200 0 0.20% Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 90+DPD Well Secured / GLA Gross Impaired Assets / GLA Collective Specific Total Provision to GLA
Australia Banking Non-Retail Portfolio % of Total P&L Charge for Bad & Doubtful Debt Investment Grade Equivalent and Well ($m) Secured Lending 301 302 70% 65% 208 60% 164 181 55% 50%
Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 For personal use only use personal For Investment Grade Equivalent % Well Secured % Sep 06 Mar 07 Sep 07 Mar 08 Sep 08
23 Well Secured - Loans to Security Ratio is less than 100% full year market update Australia Banking: Australia housing metrics 2008
Low doc loans LVR at origination (% portfolio) X $3.1bn outstanding (2.1% of housing book) 70% X LVR capped at 60% (without LMI) 69% 68% Inner-city apartments 67%
X $4.5bn outstanding 66% X 3.0% of housing book 65% Jun Sep Dec Mar Jun SepDec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08
Origination source – flows (Australia) LVR at origination (% portfolio) 90%+ 8% Mar 07 Sep 07 Mar 08 Sep 08 80%≥90% 12% 70%≥80% 40% Proprietary 75% 76% 78% 77% Broker 18% 17% 16% 16% 60%≥70% 16%
Introducer 7% 7% 6% 7% For personal use only use personal For ≤60% 24%
24 full year market update Australia Banking: Business & Private Banking and Retail Banking contributions 2008 full year full year to ($m) to (%) Business & Private Banking Sep 08 v $m Sep 07 Sep 08 Sep 07 Net operating income 4,966 4,296 15.6 Operating expenses (1,761) (1,720) (2.4) Underlying profit 3,205 2,576 24.4 Charge to provide for bad and doubtful debts (333) (153) (Large) Cash earnings after tax 2,028 1,708 18.7 full year full year to ($m) to (%)
Retail Banking Sep 08 v Sep 07 $m Sep 08 Sep 07 Net operating income 3,134 2,919 7.4 Operating expenses (1,605) (1,601) (0.2)
Underlying profit 1,529 1,318 16.0 For personal use only use personal For Charge to provide for bad and doubtful debts (270) (236) (14.4) Cash earnings after tax 900 763 18.0
25 Source: Internal, ongoing basis. full year market update MLC: A strong result in a challenging market 2008 full year full year to ($m) to (%)
MLC Sep 08 v ($m) Sep 08 Sep 07 Sep 07 Gross Income 2,195 2,185 0.5 Volume related expenses (938) (899) (4.3) Net income 1,257 1,286 (2.3) Operating expenses (681) (729) 6.6 Profit before tax 576 557 3.4 Income tax expense (168) (155) (8.4) Cash earnings before IoRE 408 402 1.5 IoRE (14) 39 (large) Cash earnings 394 441 (10.7)
Represented by: Investments cash earnings before IoRE 213 239 (10.9)
Insurance cash earnings before IoRE 195 163 19.6 For personal use only use personal For Cash earnings before IoRE 408 402 1.5
26 Source: Internal, ongoing basis. full year market update MLC: Contribution from Investments & Insurance businesses 2008 full year full year to ($m) to (%) MLC Investments Sep 08 v $m Sep 08 Sep 07 Sep 07 Gross income 1,221 1,315 (7.1) Volume related expenses (410) (441) 7.0 Net income 811 874 (7.2) Operating expenses (511) (547) 6.6 Profit before tax 300 327 (8.3) Income tax expense (87) (88) 1.1 Cash earnings before IoRE 213 239 (10.9) full year full year to ($m) to (%) MLC Insurance Sep 08 v $m Sep 08 Sep 07 Sep 07 Gross income 974 870 12.0 Volume related expenses (528) (458) (15.3) Net income 446 412 8.3
For personal use only use personal For Operating expenses (170) (182) 6.6 Profit before tax 276 230 20.0 Income tax expense (81) (67) (20.9) Cash earnings before IoRE 195 163 19.6
27 Source: Internal, ongoing basis. full year market update MLC: Key Business Drivers 2008 FUM movements ($bn) Costs ($m) 4.3
720 729 (9.7) 681 (1.9) (2.5) (5.2) (0.6) 110.2 102.9 94.6 64.1% 56.7.% 54.2%
105 2006 2007 2008 Sep 07 Net Investment Other Mar 08 Net Investment Other Sep 08 Flows Earnings Flows Earnings X% Operating expenses to net income
Balanced Funds: 1 year performance Advisors
(Mercer Personal Super Balanced Growth Universe = N = 45)
25th Percentile Median 75th Percentile MLC 95th Percentile 1,306 1,304 1,401
564 (5.3%) 484 494 (7.0%) (6.8%) (9.5%) (11.0%)
822 810 837 For personal use only use personal For
2006 2007 2008
Aligned Channels Bank Channels
28 Source: Internal ongoing basis. Mercer: Morningstar, after tax and fees for 12 months to August 2008 full year market update MLC Competitors FY08 2008
Revenue Growth on Prior Year (%) Expense Growth on Prior Year
5.6% 8.7% 3.7% 5.1% 6.2% 2.1%
(2.3%) (6.6%) MLC Bank 1 Bank 2 Bank 3 MLC Bank 1 Bank 2 Bank 3
Cost to Income (%) FY08 Cash Earnings* Growth on Prior Year 13.3% 60.5%
55.8% 54.1% 53.5% 3.7%
1.5% For personal use only use personal For
MLC Bank 1 Bank 2 Bank 3 (1.2)% MLC Bank 1 Bank 2 Bank 3
29 Source: Internal ongoing basis. * Cash Earnings growth pre-IoRE, Best available equivalent to MLC full year market update MLC Competitors FY07 2008
Revenue Growth on Prior Year (%) Expense Growth on Prior Year 18.2% 12.7% 14.5% 14.8% 15.6% 10.1% 8.8%
1.3%
MLC Bank 1 Bank 2 Bank 3 MLC Bank 1 Bank 2 Bank 3
Cost to Income (%) FY08 Cash Earnings* Growth on Prior Year
56.7% 55.2% 30.5% 30.6% 52.5% 50.8% 23.0%
20.6% For personal use only use personal For
MLC Bank 1 Bank 2 Bank 3 MLC Bank 1 Bank 2 Bank 3
30 Source: Internal ongoing basis. * Cash Earnings growth pre-IoRE, Best available equivalent to MLC full year market update MLC: Leading Positions in Core Markets 2008
Market Segment @ June 08 Market Size Market Growth Major Competitors MLC Rank - Share @ June 08 (CAGR 03-08) $Bn
Retail Investment1 489.4 12.2% CBA, AMP, ING 3 - 12.0%
Retail Superannuation2 231.8 11.9% AMP, CBA, ING 2 – 16.5%
Corp Master Trust3 79.4 13.5% AMP, ING, Mercer 2 - 16.3%
Wholesale Investment4 273.4 12.0% AMP, AXA, 1 – 7.7% Macquarie
Risk5 4.4 10.5% CBA, ING, AMP 1 – 14.8%
Group Insurance6 2.0 15.8% CBA, ING, Tower 6 – 8.5%
1. Ex Cash, this category includes Corporate Master Trust. Source: Plan for Life QDS data June 2008. 2. A subset of Retail Investment. Source: Plan for Life QDS data June 2008. 3. A subset of Retail Investment, includes Plum & MKBS. Source: Plan For Life QDS data June 2008.
For personal use only use personal For 4. Includes Asset Management & Corporate Solutions ex Plum. Source: Plan For Life QDS data June 2008. 5. Total Individual Risk In Force. Source: DEXX&R Leading Indicator Life Analysis March 2008. 6. Total Group Risk In Force. Source: DEXX&R Leading Indicator Life Analysis March 2008.
31 full year market update MLC: Advice Businesses 2008
Strong advice brands Adviser Makeup Godfrey Pembroke
184 NAB Financial Planning 564 nab financial planning 490 Garvan Financial 163 Planning & MLC Financial Planning Apogee Financial Planning
Adviser Growth Comments • MLC supports 5 strong advice brands 1,450 • MLC distributes products through three channels – nab 1,200 Financial Planning, aligned adviser networks and independent 525 564 financial advisers. 465 494 950 • MLC has focused on growing adviser networks in all channels, 700 with 105 new advisers being added over the past 18 months. • MLC has led the debate on transparency and quality, 844 450 831 810 837 pioneering fee for advice and has teamed with SAI Global to launch the 'Financial Planning 9000 - Quality Management for 200
1H07 2H07 1H08 2H08 Financial Planning Practices' (5 ticks of quality) For personal use only use personal For Aligned Financial Advisers NAB Financial Planning Linear
32 Channel advisor makeup is internally sourced & collated. full year market update MLC: Investments 2008
Investments Performance Investment Margins
Investments cash earnings before IoRE Change in Net Margins
140 0.90% 0.88% 120 0.86% 0.02% 0.86% 0.01% 100 0.84% 0.03% 0.82% 80 0.01% 0.79% $m 0.80% 60 Net Margins 0.78% 40 0.76% 20 0.74% 0.72% 0.70% 1H06 2H06 1H07 2H07 1H08 2H08 Sep-07 Annuities Protected FUM Other Sep-08 Effect Members Mix
FUM Comments
120 • The decline in Investment cash earnings for 2008 was driven mostly through the decline in FUM, the result of the investment 115 market downturn. 110 • 2007 flows were assisted by the extraordinary simpler super $bn 105 incentives; second half 2008 flows have been impacted by outflows 100 from the Trustee business. 95 • Underlying investments net margins remain relatively consistent from period to period after one-offs and asset mix are taken into 90 06 -07 -08 08 account. other other other other Sep- Mar-07 Sep Mar Sep-
net flows net flows net flows net flows • MLC has consistently delivered strong returns through our For personal use only use personal For stment earnings stment earnings stment earnings stment earnings e e e e manager of manager investment approach. inv inv inv inv
33 full year market update MLC’s Multi-Manager delivers over the long term 2008
Where the lines intersect shows the median risk and return result of the 8 managers who survived the last
22.4 years. For personal use only use personal For
Comparison with the Mercer Pooled Fund Survey - Balanced Funds Universe Annualised Risk and Return for the Lifetime of the MLC Investment Approach (22.4) years ending May 2008 34 full year market update MLC: Insurance 2008
Insurance Performance Cash Earnings on Premiums in Force
Insurance cash earnings before IoRE
120 25.0% 100 24.0% 80 23.0% $m 60 22.0% 40 110.2 21.0% 102.9 20 102.4 20.0%
% Cash Earnings on PIF on Earnings Cash % 19.0% 1H06 2H06 1H07 2H07 1H08 2H08 1H06 2H06 1H07 2H07 1H08 2H08
Premiums in Force Comments • Insurance business has continued to grow in a sustainable 900 manner over the past three years.
800 • Growth in premiums in force has been maintained without compromising ongoing profitability. $m 700 • The continued focus on both quality business practices and ongoing cost efficiencies has resulted in growing cash 600 earnings faster than premiums growth. 500 • Strong upside potential from further developing bank cross
1H06 2H06 1H07 2H07 1H08 2H08 sell. For personal use only use personal For
35 full year market update MLC: Operating Efficiency 2008
Expenses Cost to Income
400 70% 350 300 60% 250 $m 200 150 50% 100 50 40% 1H06 2H06 1H07 2H07 1H08 2H08 1H06 2H06 1H07 2H07 1H08 2H08
Employee Engagement Comments • MLC’s focus on efficiency continues to deliver flat or declining 60 14% costs for the 6th consecutive half. 12% 55 • MLC has shown a long term trend of continuing 10% 50 improvements to the cost to income, though the current 8% 45 market volatility has resulted in a half year increase. 6% 40 • MLC’s employee engagement continues to improve with the 4% strong engagement of MLC’s people to the organisations 35 2% ongoing efficiency initiatives. 30 0% 2005 2006 2007 2008 • MLC’s efficiency programs’ focus on process harmonisation For personal use only use personal For has reduced processes by up to 60% in some areas. EOS % Change
36 full year market update Contents 2008
X Overview
X Underlying results
X Sustainable Out-Performance Strategy For personal use only use personal For
37 full year market update How do we see the current environment 2008
¾ Significant opportunities for large, stable and secure banks
¾ Our fundamentals are ‘sound’ – we are in good shape
¾ Continue to strengthen our relationships with our clients – Flight to Quality
• Focus on customer not products For personal use only use personal For
38 full year market update Longer term strategic advantage 2008
X We have businesses which are advantaged and can be grown organically X SME Business Banking with Private Wealth services X Agribusiness X Manager of Manager investment model X Multi brand advisory/retail network
X We are gaining advantage from our EQS approach X Customer focussed culture X Integrated process capability X Can therefore compete with cost structure as well
X We can take advantage of longer term trends in our economy X Ageing, superannuation and private wealth development X Advisory trust, transparency and regulation X Services economy with the rise of health and education sectors For personal use only use personal For X New technologies changing the nature of our processes and services
39 full year market update Our Strategic Priorities into the future 2008 2005 2008 2012 Rebuild Truly Sustainable Competitive Out-performance
Run the region well Accelerate Efficiency Next Generation Client focused Great Company for our
Quality & Service Platforms businesses people & community For personal use only use personal For
40 full year market update Run the Region Well 2008
¾ Managing impact of global markets on funding costs, capital, liquidity & FUM
¾ Continued acquisition of deposits
¾ Taking advantage of the flight to quality and merger impacted markets
¾ Continued focus on asset quality in a
deteriorating credit environment For personal use only use personal For
41 full year market update Differentiation through process excellence 2008
We are largely at Level 2 process maturity, with some programs moving to Level 3
Future 2005-07 2008-10 Aspiration Competitive 5 Differentiation
Process 4 The Toyota of Optimisation Financial Services Process 3
TURITY Integration A
Process 2 Control PROCESS M Process 1 Definition
TIME For personal use only use personal For
42 full year market update Accelerate EQS: Next Generation Platform delivers next wave of opportunity Operating Model NGP Opportunity2008
Distribution Multi-Brand distribution businesses
Single view of customer Customer Management and Service Integrated service platform
Business Retail Wealth products Products Products One way / same way processes,
configurable products For personal use only use personal For
Flexible finance, risk engines, data Enterprise Services management, analytics on call
43 full year market update Leverage Client Focussed Businesses 2008
Grow Business and Private bank X Strong business with leading market share & a competitive advantage X Developing further via - Focus on transaction banking - Further specialisation: education, health - IFS: more local bankers, more empowered - PIW: leverage private wealth opportunity X Can continue to take share organically, particularly merger effected markets
Deliver multi brand retail banking and wealth X NAB brand focused on genuine connection and quality advice
For personal use only use personal For X MLC/GP/Garvan providing alternate Franchise distribution X UBank launched testing DIY customers
44 full year market update Australia Banking: Continued growth in transaction banking market share & trend 2008
Transaction banking market share and trend Percentage share and basis point change of primary relationships by customer segment*
25 +20 +40 +50 +50 +40 20 (60) (40) (50) +20 15 (50) +20
(30) 10
5
A NAB B C NAB A B C NAB AC B 0 Institutional Corporate SME >$340m $20m—$340m $1m—$20m For personal use only use personal For May 08 August 08 Oct 08
* Arrows relate to the trend from prior survey (six month), basis point change above the bar. Caution: In previous reporting periods, East & Partners referred to ‘Institutional’ as ‘Corporate’ and ‘Corporate’ as ‘Commercial’ source: 45 East & Partners: full year market update Australia Banking: Business Specialisation is working 2008
Sept 2008 – Year on Year PCP Growth (%)
Year Revenue Lending Deposits Established Agribusiness 2000 12 12 12
Health 2007 27 28 32
Education 2007 24 19 74
Government 2007 48 26 156 For personal use only use personal For
46 Source: Internal, ongoing basis. full year market update MLC: Meet all customers wealth and banking needs 2008
Investment sales through bank channels X Over 1,400 bankers trained
40% to sell EasyCover X 70 new planners in nab Financial Planning % via Bank Channel via Bank % 30% X Increasing insurance sales 1H06 2H06 1H07 2H07 1H08 2H08 via bank channels X Leveraging opportunities in Insurance sales through bank channels nabInvest and Private + 60% Institutional Wealth
50% % via Bank Channel via Bank % 40%
1H06 2H06 1H07 2H07 1H08 2H08 For personal use only use personal For
47 full year market update PIW: Bringing together group capabilities to further leverage the private wealth opportunity 2008
Wealth Planning
Capital Relationship Markets Banking Expertise
Risk Investment Client Management Advisory
Security Integrity
Cross- Asset Border Services
Solutions For personal use only use personal For
Trusts & Philanthropy
48 full year market update NAB: Development of banking and wealth shops 2008
High level capability now embedded in “retail plus” branch network •200 wealth planners •545 mortgage bankers
•67 micro business bankers For personal use only use personal For
49 full year market update Leading the industry evolution in transparency and trust 2008
X Attracting quality advisers X Collaboration with SAI Global – 5 ticks of Quality X Best Dealer Group awards – Garvan/MLC & nab Financial Planning X Moving to fee for advice - GPL and nab Financial Planning X Approximately 65% of new business fee for advice X Delivered fee based suite of products
X Reigniting MLC brand via targeted campaign X Brand proposition: MLC looks out for you and puts your money to work, growing and
For personal use only use personal For protecting it, with your best interests at heart
50 Dealer Group of the Year (NAB FP) awarded by Money Management CoreData (July 2008) & Dealer Group of the Year (Garvan/MLC Financial Planning) awarded by IFA / CoreData (November 2007) full year market update
Launch of DIY initiative 2008 For personal use only use personal For
51 full year market update Investing in our people 2008
Transforming the way we lead and reward our people
‘The People Framework’ Delivering our strategy through our people and driving productivity Reshaping the way we approach capability development
‘The Academy’ For personal use only use personal For
52 full year market update Australia Region: LTIFR 2008
Australian Region LTIFR*
5.0
3.6
1.9 1.6
2005 2006 2007 2008
LTIFR For personal use only use personal For
Source: Internal, ongoing basis. Full Year LTIFR – Lost Time Injury Frequency Rate (2007 figure also includes an estimate for late claims) Note: Industry standard calculation, Total hours worked is FTE x 40 hours x 46 weeks i.e. adjusting for public 53 holidays / leave taken. full year market update Delivering a strong community agenda 2008
X New commitment for micro-enterprises Microfinance – $100m – 120 new enterprises helped
X Major indigenous initiatives Indigenous Affairs – $12m in funding over three years – Commitment to financial services & employment – Landmark partnership with TCU
X Flagship community-schools program “Schools First” Education – $15m in funding over three years
X Major initiatives Community – 150th celebration – Over 5,500 days in the community
– 160,000 kids in Auskick For personal use only use personal For X 2010 carbon neutral on track * Environment – Strongly engaged employee base
54 * nab “Carbon Neutral Update” April 2008 full year market update Economic Outlook: November 2008 2008
Estimated System Growth FY09 FY10 Mortgages 8.0% 7.0%
Other Personal Lending 3.0% 5.0%
Business Credit 6.0% 4.0% Total Credit System 6.5% 5.0%
Retail Deposit 9.0% 9.0%
¾ In the current environment, economic assumptions are being re-assessed
on a regular basis For personal use only use personal For
Note: These system growth estimates have been prepared by nab Group Economics on the basis of currently available information. Of necessity, they involve the exercise of numerous judgements, and rely upon many assumptions about the future, some or all of which may not occur, or may not occur as anticipated. These estimates are intended for information purposes only, and should not be relied upon as an indication of the future performance or likely future performance of 55 National Australia Bank. Refer to the Disclaimer for further information regarding forward-looking statements. full year market update Disclaimer 2008 Disclaimer: This document is a presentation of general background information about the Group’s activities current at the date of the presentation, 17th November 2008. It is information in a summary form and does not purport to be complete. It is to be read in conjunction with the National Australia Bank Limited Full Year results filed with the Australian Securities Exchange on 21 October 2008. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.
This announcement contains certain "forward-looking statements". The words "anticipate", "believe", "expect", "project", "forecast", "estimate", “outlook”, “upside”, "likely", "intend", "should", "could", "may", "target", "plan" and other similar expressions are intended to identify forward- looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements.
Note: Information in this document is presented on an ongoing operations basis.
For further information visit www.nabgroup.com or contact:
Nehemiah Richardson Brandon Phillips General Manager Investor Relations Group Manager, Media Relations
Mobile | 0427 513 233 Mobile | 0419 369 058 For personal use only use personal For
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