NAB announces trading halt after earnings fall 51 per cent
National Australia Bank has slashed its interim dividend to 30 cents and launched a $3.5 billion capital raising after its first-half cash earnings more than halved to $1.46 billion.
The big four lender's statutory net profit for the half-year ended March 31 was down 51.3 per cent to $1.31 billion while cash earnings fell by 51.4 per cent in a surprise early release of the lender's interim profit result on Monday.
The big four lender had been due to publish its half-year profit result on May 7.
NAB last week flagged a big first-half hit to profits through software capitalisation changes, an increase in refunds related to its fee-for-no-service scandal and a writedown against its 20 per cent investment in wealth manager MLC.
NAB's interim dividend cut from a fully franked 83 cents a year ago comes as the bank increases its collective provisions for forward-looking economic and targeted sector adjustments by $828 million to $2.14 billion.
Chief executive Ross McEwan on Monday said the bank was taking proactive steps to shore up its balance sheet as the nation faces a possible "prolonged and severe economic downturn".
"There is much uncertainty as to how long this period of dislocation will last and the outlook for recovery," Mr McEwan said.
"Necessary interventions to contain the spread of COVID-19 are having wide ranging impacts across the Australian and New Zealand economies, with sectors such as airlines, retail trade, hospitality and commercial real estate severely impacted.
"Our expectations are for a recession and much higher unemployment over 2020 and into 2021."
Prudential regulator APRA this month advised the banks to suspend their dividend payments until there is more certainty around the economic landscape.
Mr McEwan said the decision to pay a dividend was a balancing act that recognised the bank's retail shareholders.
"I can tell you retail shareholders will not be happy with a dividend reduction but we believe we have done the right thing," Mr McEwan said.
(About) 48 per cent of shareholders do rely on a dividend ... at the time of a placement you don't want the share price dragged down."
NAB said the $3.5 billion capital raising is expected to increase the group's Common Equity Tier 1 Capital ratio to 11.2 per cent from 10.39 per cent at March 31.
NAB SLASHES DIVIDEND, H1 PROFIT PLUNGES
* Net operating income down 3.3pct to $8.57bn
* Cash earnings down 51.4pct to $1.46bn
* Net profit down 51.3pct to $1.31bn
* Interim dividend 30 cents fully franked, down from 83 cents a year ago.
Originally published as NAB slashes H1 payout, to raise $3.5bn