THE DISTILLERY: NAB affection

The love affair with our big three reporting banks continues this morning for the chatters and scribblers. But before them, the sell-off that started in silver early Monday is now a rout with that metal down 30 per cent, oil 10 per cent overnight, the Australian dollar fell another cent and US bond yields are lower again (and down almost half a per cent in a month). America's weekly unemployment number hit an eight-month high ahead of the April jobs report tonight and in Australia there are fears the economy is contracting, or at best stuttering in neutral. The Reserve Bank produces its latest monetary policy statement this morning and the Senate inquiry into banking reports.
 
The Australian Financial Review says: "Soft retail spending figures and weak commodity prices pushed the Australian dollar down to a seven-day low on Thursday, as the currency continues to fall from its recent record highs." And the dollar again fell overnight after the European Central Bank left rates on hold. The paper also reported that: "There has been a big setback to hopes that consumers are beginning to pick up their spending following a shock fall in retail sales."
 
And the AFR says there's one bull in gold: "Gold investors remain undaunted by silver's 18 per cent slump this week, with Barclays Capital expecting $US1800 an ounce in the first quarter of next year." Gold is off more than $US100 an ounce and our market won't be able to resist the slump on Wall Street today like it did yesterday.
 
The question for investors now is whether the sell off is real or a passing fad. The Australian's Tim Boreham had a good point this morning about the looming listing of the huge Glencore commodities and mining group: "One view of Swiss resources house Glencore's $US11 billion ($10.3 billion) raising and IPO is that it rings the bell on the mining boom. British analysts were quick to decry the indicative pricing for the raising, which will value Glencore at $US55 billion, as "well up the hill" and "way out of line". It doesn't help that Glencore chief and 18 per cent holder Ivan Glasenberg becomes a billionaire 10 times over." This point hasn't escaped other commentators offshore either.
 
On banks, it was the National Australia's turn to be adored, especially in Melbourne. The Age's Malcolm Maiden wrote this morning: "One of the takeaways from this week's profit reports from three of the big four banks is that divorce is suiting the National Australia Bank. The risk in the decision of the chief executive, Cameron Clyne, to push NAB out in front of the other banks on fees and home loan and deposit rates was that he would buy market share, but at too high a price. But NAB's March half result, announced yesterday, suggests that Clyne is winning the battle."
 
And it was a similar story in Melbourne's Herald Sun: "National Australia Bank chief Cameron Clyne has vowed to expand the game-changing agenda finally propelling it to darling status among investors. The bank had "picked a fight" with its rivals and would not back away from its aggressive campaign to poach customers and redraw the domestic banking landscape, Mr Clyne said. His comments came as the bank posted a watershed first-half result that provided the first compelling evidence the strategy was reaping dividends." Cue the Rocky music, will you? 
 
And The Australian Financial Review's Chanticleer columnist was also laudatory: "For a man with $68 billion of lead in his saddlebags, Cameron Clyne at National Australia Bank is doing pretty well." Whoa there neddy, don't buck, he's a banker! 
 
The Australian had a similar approach: "National Australia Bank chief executive Cameron Clyne has declared the bank will maintain its aggressive campaign to win customers from rivals after the strategy helped it deliver a $2.67 billion first-half cash profit. Mr Clyne said the campaign, under which NAB pays the exit fees of CBA and Westpac, would be extended. "The 'Break Up' campaign was a step in the process," Mr Clyne said. "We started it and there's more to come. It has had a very positive impact in all of our businesses." Yes, he's not only a banker, but a contender!
 
And more cheering from the Melbourne branch of the commentariat, with The Australian's Matthew Stevens writing this morning: "On Valentine's Day, NAB chief executive Cameron Clyne launched his remarkable "break up" campaign, a marketing effort aimed at announcing his bank's divorce from the other three banking pillars. Yesterday he translated that advertising rhetoric into cold, hard number, delivering an interim result that at once pleasantly surprised investment markets with outperformance across a range of metrics, confirmed his progress of meeting targets nominated on his appointment nearly three years ago and quietly foreshadowed better days ahead." The NAB's from Melbourne, the CEO is from Sydney, oh! 
 
Fairfax's Adele Ferguson was surprised at the quality of the interim NAB result in her daylight comment yesterday: "After years of disappointments and financial tricks to tart up headline profit numbers, National Australia Bank's Cameron Clyne has released a set of figures that surprised the market on the upside. Investors showed their support by lifting the share price 2 per cent at midday as they continued their dumping of other banking stocks over the past few days. It seems Clyne's decision to turn NAB into the people's bank is starting to show cut through, as is his push to be the dominant player in business banking. The profit jump is a real positive at a time when the big banks and regional banks are struggling to find top-line growth from writing loans."
 
But Business Spectator's Stephen Bartholomeusz was less enthusiastic: "National Australia Bank has produced a surprisingly strong March half result, with stronger growth in income and cash earnings than its peers that reported earlier this week. The jury remains out, however, on the success of Cameron Clyne's high-profile retail banking strategy. Cash earnings growth of 11.7 per cent relative to the September half of last financial year – 21.7 per cent higher than for the March half last year – reflected across-the-board improvements in the profitability of NAB's divisions, with a big rebound in wholesale banking and UK bank earnings providing much of the impetus. Unlike its peers, NAB didn't get a big boost from an improvement in its bad and doubtful debt charge which, while down 19.7 per cent on a March-on-March basis, improved only 4.4 per cent between the September and March halves."
 
The Australian's Tim Boreham summed it up yesterday wrote on the paper's website yesterday: "No offence to the top brass at the big red star, but we're still getting accustomed to the traditional laggard of the big four being the dazzler of the sector. The NAB posted a 21 per cent leap in cash earnings to $2.668 billion this morning, easily beating consensus expectations of around $2.55 billion. The NAB proved it can have its banking cake and eat it by posting decent revenue growth, while appealing to retail customers by being nice and offering cut-price loans. For those (or other) reasons, NAB shares rose 2 per cent in an otherwise softer banking sector."
 
The AFR reported: "National Australia Bank remains upbeat about the outlook for the Australian economy, saying the mining boom will create more credit growth as it posted a $2.7 billion cash profit for the six months to 31 March."

And the Fairfax CBD gossip column reported more tough words from the NAB boss: "In terms of competition, that's normal. We picked a fight, we hoped people would turn up and they did – that's fine. We'll continue to punch,'' said Clyne at the bank's half-year results yesterday. Rather than just hiring pianists and writing letters as part of his break-up campaign from the other three big banks, Clyne is clearly happy to use some of the rough-hand tactics from his days playing rugby." Ding, ding, seconds out, round two!
 
Elsewhere, Fairfax's Elizabeth Knight said yesterday: "News Corp this morning reported a slump on third quarter profits, thanks in large part to the runaway success of the blockbuster Avatar, but it also took the opportunity to reassure investors about the BSkyB deal. In today's comments, News Corp management was at great pains to assure investors that it wouldn't be overpaying in its bid for full control of UK satellite group BSkyB. Meanwhile, News Corporation's third quarter result demonstrated that improved advertising markets boosted its cable and television businesses, but the film division suffered from the comparison with the corresponding quarter that contained the results of blockbuster Avatar."
 
Various papers including the AFR reported this morning on a big cost saving in the budget: "Half a million workers with company cars and thousands of employers are faced with overhauling their tax affairs after the Gillard government agreed to revise fringe benefits tax rules to save almost $1 billion."
 
This morning Knight wrote on an entirely different subject, carbon tax and the prime minister's dinner in Sydney on Wednesday night: "Those I spoke with yesterday said they did not receive any sneak preview of the detail of the carbon tax or the carbon trading system but were assured that the mid-year timetable for the release of the nuts and bolts remained on schedule. Her choice of guests was telling. All of them will be affected to a greater or lesser degree by the placement of a tax on carbon. However, almost half are engaged in the production or sale of gas, and could ultimately benefit from a move away from dirty energy supplies such as coal. Shell, Origin, Santos and AGL fall into this camp."
 
And finally, The Australian's Nabila Ahmed said: "It was standing room only when Nufarm chief Doug Rathbone spoke at the Macquarie conference yesterday. Rathbone outlined the company's recovery path, including the shift away from its main weed killer glyphosate, as stiff competition from cheaper Chinese products and weak demand drags down prices. Nufarm is also expected to focus on small-product acquisitions to augment its current offering. What Rathbone didn't talk about, though, was the company's search for a new chief financial officer, which is expected to take another two to three months."