Clyne confirms: NAB a low return option

National Australia Bank earns the lowest return of the big four banks, NAB CEO Cameron Clyne acknowledged yesterday at a hearing of the Senate economics committee held in Sydney.

"My bank," he said, "has not delivered the return to shareholders that people expect."

The context of his remark was his explanation to the committee of why the remuneration reports published by listed companies for their most senior staff were so much bunk.

"Half of what I earn I'll never get," he told the committee.

Clyne had already argued before the committee that return on equity and also return on assets were the best measure of a bank's profit, rather than large headline numbers in the order of $5 billion or $6 billion for each large bank in Australia.

"Our return on equity dropped substantially [over the crisis], by 300 to 350 basis points. Our ROE is well below what it was."

He said NAB's ROE was now around 13.5 per cent.

Asked if a lot of companies would be happy with an ROE of between 13 per cent and 16 per cent, Clyne said that "even at about 16 you would find the banks rank about half way down the ASX100" and went on to explain why banks were unlikely to achieve a higher ranking in a listing of companies by return on equity.

"13 to 16 does not represent an excess by Australian ROE standards.

"We have to hold a substantial amount of capital. We have hundreds of billions in assets. Our returns are naturally lower.

"What we are is a solid, dividend-paying stock. Not everything has to be a high ROE if you are able to pay a strong dividend."