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 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 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 full year market update Contents 2008 X Overview X Underlying results X Sustainable Out-Performance Strategy For personal use only 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 $500m plus of cost savings For personal use only since the program commenced X Closely monitored underlying asset quality, with a flat B&DD expense 2H08 v 1H08 2 Source: Internal. * FY08 ongoing basis. ^ Cash earnings before IoRE includes Other (incl. Asia) full year market update Australia Region: Achieving Sustainable Results CAGR FY05 to 2FY08008 = Australia Region Half Yearly Cash Earnings ($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 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 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 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 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% 80% 37% 36% 36% 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 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 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.