Bad debts, tax worries hurt NAB

National Australia Bank, the lucky country's biggest lender to businesses, slumped to a fiscal second-half loss after charges for bad debts climbed and the company set aside funds for a tax settlement in New Zealand.

The net loss of A$75 million ($92.4 million) in the six months ended September 30 compared with a profit of A$1.85 billion in the year earlier period, the Melbourne-based bank said yesterday. Cash earnings rose 8 per cent to A$1.81 billion.

Chief executive Cameron Clyne, who took over in January, has embarked on the bank's biggest acquisition spree since 2007, adding life insurance, mortgage and wealth-management businesses to shelter earnings as loan losses rise.

"If you look at the outlook there are a number of positive signs but you also need to be somewhat cautious," Clyne said at a briefing in Sydney.

Asset quality "might be stabilising but there are still a number of issues to be worked through".

Charges for bad and doubtful debts in the second half rose to A$2 billion from A$1.76 billion in the year-ago period, National Australia Bank said.

National Australia said it may reduce the bank's Tier 1 capital ratio, a measure of the lender's ability to withstand future losses, "when conditions become more predictable".

National Australia shares have jumped 47 per cent this year after the country dodged the global recession.

"We seem to be past the worst of the cycle," said George Boubouras, head of investment strategy at UBS's Australian wealth-management business, before the earnings release. "We buy the banks for earnings certainty, because they've increased their market share in Australia. There's margin growth."

Full-year profit at the bank fell as bad debts swelled and earnings slumped in the UK. Net income dropped to A$2.59 billion from A$4.54 billion. NAB shares closed 87c lower at A$29.83.

- BLOOMBERG