NAB cuts further 2500 jobs

SYDNEY - National Australia Bank posted a smaller-than-expected 12.5 per cent fall in first-half profit, set plans to slash jobs and forecast earnings growth, propelling its shares to a 10-month high.

The bank is cutting a total of 4200 staff, or about 10 per cent of its workforce, over two years. The 2500 job cuts announced yesterday affect Australian staff and about 400 in Asia, where the bank will close its institutional markets and services offices in Singapore, Korea and Malaysia and shut its Tokyo securities company, but retain a Hong Kong office.

The country's biggest bank by assets, which already plans to cut 1700 jobs in Britain to rein in costs after selling its two struggling Irish banks, said it expected "acceptable earnings growth" in the second half, albeit below that of its major peers.

First-half net profit rose 17 per cent to A$2.535 billion ($2.69 billion), largely due to a A$1 billion profit from the sale of the Irish banks to Denmark's Danske Bank.

"It appears the National perhaps will have a recovery greater than they're actually giving guidance for at this point," said fund manager Ausbil Dexia chief executive Paul Xiradis.

Shares in the National, which is restructuring its Australian retail, institutional and fund management businesses, rose as much as 1.8 per cent to a 10-month high of A$30.45.

Cash earnings before goodwill amortisation and one-off items for the six months to March 31 fell to A$1.618 billion from A$1.850 billion a year earlier.

Competition has squeezed banks' lending margins, a key measure of lending profitability. National's group net interest margin fell 21 basis points to 2.19 per cent in the year to March 31. In the latest six months, it fell 10 basis points.

The federal Government said it wanted a "good explanation" for the redundancies as the National was highly profitable.

"I feel for the people who have lost their jobs," Treasurer Peter Costello told local radio.

The Finance Sector Union said the decision was "destructive and a betrayal of commitments provided to staff by senior executives who had previously undertaken not to punish staff for failings at the top". It did not rule out industrial action.

NAB said it would pay a first-half dividend of 83Ac a share.

- REUTERS