Address by Mr Michael Chaney Chairman National Australia Bank Annual General Meeting 19 December 2013 Good morning, I am Louise Thomson, Company Secretary of National Australia Bank. Before commencing this Annual General Meeting, I would like to acknowledge the traditional owners and custodians of the land on which we meet today, the Wurundjeri people of the Kulin Nation and pay my respects to their elders both past and present. I would now like to introduce our Chairman, Michael Chaney. My name is Michael Chaney and I have the honour to be your company’s Chairman. It is 9:30am, this is a properly constituted meeting and a quorum is present. I therefore declare this Annual General Meeting of National Australia Bank Limited open. It is a pleasure to be in Melbourne and I welcome those who are attending in person. I also welcome those shareholders who are viewing the meeting on the internet. - 1 - Let me now introduce to you the people who are on stage with me today. Seated on my left, on your right, is our Group Chief Executive Officer Cameron Clyne. Next to Cameron is our Group Executive, Finance & Strategy, Craig Drummond. Seated on my right is the Company Secretary, Louise Thomson. Seated in the front row are the other directors whom I will ask to stand as I introduce them. Firstly, Mr Danny Gilbert, next to Danny is Dr Ken Henry, Mr Mark Joiner, Mr Paul Rizzo, Ms Jillian Segal, Mr John Thorn, Mr Geoff Tomlinson, Mr John Waller and Mr Anthony Yuen. The board has a strong mix of skills and experience that has served us well. The auditor Ernst & Young, represented by the Lead Engagement Partner, Mr Andrew Price, is also present at today’s meeting together with John MacDonald. The Notice of Meeting has been sent to shareholders, which I propose be taken as read. The Annual Report described in detail the company’s performance for the 2013 financial year. Overall the NAB Group’s results in 2012/2013 were improved over the previous year. Group cash earnings were $5.94 billion, representing an increase of $503 million or 9.3% over the 2012 figure, with higher earnings across all banking businesses. Net profit attributable to the owners of the Company was $5.45 billion, an increase of $1.4 billion or 33.6% on the September 2012 full year. The directors declared full year dividends totalling 190 cents per share, an increase of 10 cents. - 2 - Balance sheet strength continues to be a priority for us and we remain well capitalised. The Group’s strategic focus remains on the Australian franchise, which performed well during the year. The Personal Banking division achieved a 17.5% increase in cash earnings through above-system growth in mortgage lending and improved margins. The Australian business has benefited from a relatively strong economy post-GFC, despite domestic growth slowing in the past year as we face into the challenges of weaker commodity prices and a decline in mining investment. Conditions for our customers remained mixed across sectors. A stubbornly high exchange rate weighed on exporters during the year, the labour market remained soft and government efforts to return budgets to surplus have restrained spending. Consumers remain wary of the economic outlook and are saving, rather than spending. We have, however, seen some improvement in the share market and house prices, in part reflecting the interest rate cuts by the Reserve Bank. It seems clear that Australia is faced with, at best, some years of modest economic growth and rising unemployment. Business conditions are subdued and, unless economic reform and restructuring continue, are likely to remain so. That is the challenge facing governments and all participants in the economy. Internationally, conditions have also been mixed. We have seen stabilisation in Western Europe, an upturn in Japan, and solid but slowing growth in the emerging market economies of East Asia which buy over half of Australia’s exports. Chinese demand holds the key to many commodity - 3 - markets and fears of a hard landing in China’s economy look overdone with acceptable growth continuing there. Importantly, economic conditions have started to look a lot brighter in the Group’s main areas of operation overseas. Growth in the UK economy has resumed, though there is still a lot of ground to make up. The improvements in the UK operating environment have been a key driver in the substantially lower loan losses for the Group. We are seeing Group legacy issues recede, reflecting the work done to make Clydesdale Bank largely self-funded and profitable. While disposal of the UK business has not proved possible to date, the major restructuring we undertook last year is beginning to bear fruit. Our banking businesses across the United States and New Zealand also performed well during the year, against a backdrop of moderate recovery in the US and an improving economy in New Zealand where business surveys show a broad-based upturn across regions and industries. In March this year, our Chief Executive announced a major restructure designed to capitalise on the opportunities created by our ongoing investment in technology and to align our business to the evolving environment and changing customer behaviours. The restructuring, which is now complete, will allow the Group to reduce complexity and duplication, achieve more effective and efficient processing and provide our customers with simpler and easier-to-access products. These are significant and important changes which are aimed at positioning NAB for the future of banking. - 4 - The last five years have seen an explosion of new regulation in the financial services industry with a resulting rise in the cost of compliance. We welcome the new Australian Government’s announced three-year moratorium on significant new regulation. Any new regulation must take into account the potential impact on Australian banks’ ability to be competitive in a global market. Last month, the Federal Government released the draft terms of reference for the Financial Systems Inquiry. It has been 16 years since Mr Stan Wallis AC led a similar inquiry and 32 years since Sir Keith Campbell undertook the first major investigation into Australia’s financial system. The inquiry presents an important opportunity to examine the challenges facing the financial system including the important issue of funding Australia’s future. NAB will continue to engage with this process as it progresses. This year, we have announced the departure of two Board members: Tricia Cross who had served on the Board for 7 years; and Mark Joiner, who will depart next year after serving for almost 5 years as Executive Director, Finance. I would like to thank Mark and Tricia on behalf of the Board for their important contribution to the Group and the wealth of banking and business experience they have brought. Mark played an integral role in steering the Group through a challenging time for banks and will continue to be part of the NAB Group as Chairman of JB Were. Before I hand over to Cameron to discuss the year in more detail, I would like to thank our employees for their commitment during the year. Their focus on the customer and on delivering satisfactory returns for our shareholders has been the key driver of this year’s result. - 5 - Let me now call upon our Chief Executive, Cameron Clyne, who will outline our strategic priorities and update you on how our businesses are progressing. Thank you, Michael. I would like to add my welcome to everyone attending today in person and to those watching online. I am very pleased to host our AGM in Victoria this year. NAB has been part of Victoria for over 150 years and, with over 22,000 NAB employees and 160,000 NAB shareholders in Victoria, we understand the important role we play in supporting our local community and economy. We’re continuing to create new opportunities for Victoria. This year we opened a $2.5 million Business Banking Centre in Geelong, a significant investment that will support business growth in the region. We also added two new "Good Money" stores, in partnership with Good Shepherd Microfinance and the Victorian Government, in regions of Victoria with high levels of financial exclusion. These stores are designed to provide community finance to low-income Victorians, and compete more directly with payday lenders. We’re also building important infrastructure in Victoria, this year supporting the development of the New Bendigo Hospital project which will be Victoria’s largest regional hospital when it is completed in 2016. 2013 has been a significant year for the Group and I would now like to provide some more detail on our performance for the year and also an update on the strategy we announced in March. - 6 - We’ve improved across most of our business units and we’ve had solid progress against our updated strategy, implementing organisational changes that achieved an expense saving in 2H13 of $30 million and an expected run-rate savings of $130 million. In March this year, we refreshed our strategy to better align to the changing economic and social environment. We’ve since centralised our operations, technology and project services to deliver quicker turnaround times, fewer errors and lower costs. We’ve done this to make it easier for our customers to do business with us. And we’re starting to see the benefits right throughout the business. Personal Banking has had a great story of growth this year. We’ve added an impressive 344,000 net new transaction accounts in FY13. We’re also continuing to benefit from above system growth in home lending.