NAB

With the UK economy experiencing its first double-dip recession since the 1970s, National Australia Bank (NAB) has officially joined the laundry list of Australian companies and banks that have failed miserably overseas. NAB will shift its poor-performing book of UK commercial property loans on to its much larger Australian balance sheet and put it in runoff (similar to RHG’s loan portfolio). While it has very little economic impact, the move helps keep the UK regulators at bay.

In addition, the UK banking business will cut 1,400 jobs by 2015, close branches and stop making loans to property developers. Write-offs and restructuring expenses of £550m are eventually expected to save the company £74m per year. Fortunately for shareholders the losses pale next to NAB’s $754bn of assets and 2011 profit of more than $5bn.

To soften the blow, NAB also announced that its unaudited cash earnings for the six months ending 31 March (NAB has a 30 September year end) increased 5.7% to $2.82bn. Management also flagged an increase in the interim dividend from 84 to 90 cents. We’ll cover the full details when they’re released on 10 May. With the share price increasing 9% since 9 Feb 12 (Hold – $23.05), we’re switching back to AVOID.