Uncertainty will create opportunities, says Yorkshire Bank owner

YORKSHIRE Bank's parent National Australia Bank is planning major growth this year despite the uncertain economic times.

The group, which celebrates its 150th anniversary this year, says that the strength of its core Australian business coupled with the renewed performance of its UK operation which includes Yorkshire and Clydesdale Banks, would more than insulate it from any fall-out from the sub prime mortgage market crisis in the US.

It said that the uncertainty in world financial markets is likely to continue but might create opportunities in terms of acqusitions.

At NAB's annual general meeting in Perth, Western Australia, today, chairman Michael Chaney told shareholders that the 17% rise in the group's profits to £2bn which included a contribution of £270m from its two UK banks were achieved thanks to “a well articulated strategy focused on strong revenue growth in chosen segments and the careful management of costs”.

He said: “The second half was particularly challenging as the emerging sub prime issue in the United States sparked ongoing global concerns.

“The bank is well capitalised and has strong funding capability, notwithstanding the current higher borrowing costs being experienced by all financial institutions.

“The strength of our balance sheet has allowed a business as usual approach during the recent financial market disruption.”

John Stewart, the group's British-born chief executive, said that NAB had come a along way from three years ago when revenues had stalled, costs were rising, and customers and staff were disatisfied.

“Our United Kingdom business is in much better shape delivering good growth in cash earnings underpinned by the successful integrated financial services model. Cash earnings were 14.3% higher and operating expenses decreased.

“World markets are very volatile and likely to remain that way for some time to come. This uncertainty, started by the sub-prime issues in the United States, is

likely to be longer lasting and more widespread than we all thought last year.

“The outlook is further complicated by the potential for the United States to go into recession.

“Against this background, National Australia Bank is faring well although we are far from complacent. We plan strong revenue growth in our chosen segments.

“Annual operating expense growth will remain within inflation to 2010, and over the next three years, we expect growth in shareholder value will be driven by our existing businesses delivering on our strategies to achieve these goals.

“However, we will continue to assess new opportunities against our strategy so as to identify the platforms for longer term growth in shareholder value.”

Chairman Mr Chaney said that an example of that was the acquisition of Great Western Bank in South Dakota in the United States last November.

“NAB's skills in agribusiness lending represent one of its real strengths, and through ongoing strategic planning over the last two years, we have identified a

number of regions outside Australia where those skills might be put to very profitable use. The American mid-west was one of them.”