Domestic business scab ails NAB

National Australia Bank's domestic banking business exposed itself once more as the weakened patient at the heart of the bank's operations.
 
NAB's full year profit is the shakiest from any big bank since the GFC forced the industry to confront a surge in bad debts in 2009.
 
A group return on equity of 10.9 per cent and a return on assets of less than five per cent positions NAB below the likes of Bendigo and Suncorp in the industry pecking order. Even tiny country credit unions have produced better returns.
 
Cash earnings for NAB's Australian banking division were flat on the September 2013 full year at A$4.9 billion, "with modest revenue decline and higher expenses" offset by a further fall in the charge for bad debts.
 
The Australian banking cost to income ratio increased from 41 per cent to 39 per cent year on year.
 
The group's banking cost to income ratio increased from 47 per cent to 53 per cent year on year, and then climbed to 60 per cent in the second half, thanks to the bank's UK travails.
 
The division's profit was also flat in the second half over the first, with all the margin pressure in the group concentrated in Australia, with most of that experienced over the second half of the year thanks to a lively competitive environment.
 
Revenue from business lending fell five per cent over the full year. Revenue from personal lending, credit cards, investment securities and margin lending also fell four per cent.
 
Lower revenue seems to be a function of operational factors and weak sales rather than slack credit demand or a strategic choice to lead industry price points lower.
 
NAB explained that "excluding the impact of markets and treasury income, revenue fell 0.6 per cent over the year but increased 1.8 per cent over the six months to September 2014."
 
Increased project spend and volume related growth pushed expenses up, but these were stable over the half year, NAB said.