UBank start-up losses outlined

A revised breakdown by National Australia Bank of earnings and other metrics of each business unit using its updated definition of each business produces a few puzzles.

The "Personal banking" business in Australia, for example, generated cash earnings in the year to September 2009 of $875 million, which is less than the earnings of $963 million reported back in October for what NAB then labelled Retail Banking.

The notes in the short presentation yesterday state that the key difference is the inclusion of the UBank business, previously lumped under the label.

So perhaps there's a clue over the extent of start up losses and maybe negative margins in UBank (which continues to offer the highest deposit rates in the market).

Cash earnings in the business bank in Australia for 2009 are now said to be more than $200 million lower at $1.6 billion. The other profits NAB distributed to MLC (which now oversees the private bank) and wholesale (formerly nabCapital).

NAB also provided several slides of data on the bank's $18 billion in exotic, structured and now-troubled assets picked up pre-GFC, and managed in a business unit named Specialised Group Assets.

The bank had provided very little insight into these assets in the 2009 profit pack.

The bank has made provisions of only $524 million, even though $800 million are classed as in "default or restructure" and another $1.3 billion are below investment grade.

On a risk-weighted basis the loans in default are reported to be $2.4 billion, or 10 per cent of the risk-weighted assets in this toxic portfolio.