The Distillery: Nifty NAB

The second member of the big four banks to report results this week has left the market a little underwhelmed. It’s not that the National Australia Bank performed poorly – a record $6 billion cash profit highlights otherwise, but the market just has high expectations. 

According to several commentators, NAB is still paying the price for its UK business, with the pressure valve yet to be lifted on chief executive Cameron Clyne. 

The Australian’s Richard Gluyas explains that yesterday’s market reaction was a reassessment of the recent surge in the group’s stock price, which had been predicated on British optimism.

“Yesterday's dip – the stock sagged as low as $34.95 – was an acknowledgment that those hopes were overblown. In Britain, where the good news is the economy continues to climb out of recession with a 0.8 per cent September quarter growth rate, NAB remains plagued by a plethora of "conduct issues", like mortgage repayment irregularities.”

Meanwhile, The Australian Financial Review’s Chanticleer columnist, Tony Boyd, outlines the good and the bad news for NAB shareholders. In Clyne’s five-year reign as chief executive he has a handy scorecard, Boyd contends, but it’s the UK operations that keep it from being perfect.

“Clyne’s strategy was pretty simple. Rebuild customer satisfaction as a stepping stone to gaining momentum in the personal banking market. Capitalise on the bank’s dominant position in the business market. Capture the upside in wealth management. Lift the return on equity in the UK and improve the overall transparency of the operations. Clyne gets a tick for just about every one of those items, with the exception of the UK and wealth management.”

Fairfax’s Adele Ferguson agrees that Clyne has had a few wins, but like Boyd, views his tenure as incomplete. Selling, or markedly improving, the UK business is a must.

“While the sale remains out of his control, rectifying past mistakes is his task. Investors want improvement, no nasty surprises and a market leader. That's what he's paid to create. We're still waiting.”

Business Spectator’s Stephen Bartholomeusz is more forgiving, suggesting the undoubted progress in the UK is reason for cautious optimism. Indeed, there is light at the end of the tunnel.

“The UK legacy he inherited even as the financial crisis erupted has disfigured NAB’s results and coloured assessments of his tenure. But both the 'good' and the 'bad' banks NAB owns in the UK are beginning to quite sharply improve their performances (off ugly bases) in response to NAB’s major restructurings and promising signs of improvement in the UK economy.”

There is no disagreement in the commentariat surrounding the best part of NAB’s result, however, with personal banking a clear winner.

The AFR’s Andrew Cornellapplauds the turnaround in this side of the business in recent years.

“This NAB result, looking through the transient impacts, is very solid. The bank’s resurgent personal bank, the main problem when chief executive Cameron Clyne began his “more give, less take” strategy, was the star performer.”

In other company news, the AFR’s Matthew Stevens delineates the flow-on effect from the ACCC’s ruling on a Bega purchase of Warrnambool Cheese and Butter, while The Australian’s Adam Creighton argues it’s time for the government’s backing of the car industry to cease. At some point we have to realise there’s “nothing special about the car industry”.

Finally, Fairfax’s Malcolm Maiden asks what it is we want from our corporate regulator as its reputation takes a hit from the Securency and Leighton scandals, while the AFR’s John Kehoe analyses the latest moves at the Fed. It’s a case of ‘as you were’ and Kehoe ponders whether it’s time to start talking asset bubbles?