Giles Parkinson
Sydney View
The second-highest profit in Australia's history is not enough to satisfy the critics. Easy come, easy go.
National Australia Bank (NAB) announced a record profit of $A2.82 billion ($3.5 billion) last Thursday morning and by Friday night the market had wiped exactly that amount of the bank's market capitalisation.
It was a plunge of 10 per cent.
Since Frank Cicutto took the helm of Australia's biggest market darling of the past decade, the bank's shares have lost 25 per cent of their value, or $A13 billion. But it is not Mr Cicutto's fault.
There has simply been a changing of the guard in the Australian banking system in more than one sense. NAB is being punished for no reason other than the market does not know Mr Cicutto very well and he is being accused of not being former chief Don Argus or his predecessor, Nobby Clark.
Mr Cicutto's cause was not helped by the latest results, which showed an unexpected $A140 million blowout in costs.
He tried to make all the right noises: he talked about growth opportunities, and he talked about acquisitions -- but what the market really wanted to hear was buybacks because that is what is in vogue.
As Mr Cicutto put it: "We've produced the second-highest profit in Australia's history but that wasn't enough to satisfy the market."
Mr Cicutto is not alone in trying to win over a sceptical audience. ANZ's John Macfarlane has been struggling for acceptance for two years now, although for him it seems the tide is finally turning.
Westpac's David Morgan is another who is greeted with some suspicion. He has presided over a record profit of $A1.4 billion and has taken hard decisions, such as the announced job losses of 3000 people, to show he has the makings of a tough leader.
But he is still not comfortable.
On Friday, Westpac was the only bank not to announce an interest rate rise. That was because it was the only bank having a press conference that day.
If Mr Morgan and his PR aides are not comfortable about his having to justify normal bank business, then it will take quite a bit to win the market over.
The undisputed king of the banking sector is now David Murray. He has been at the head of the Commonwealth Bank for seven years, presiding over a fourfold increase in profits and an even better rise in the share price. Even more pointedly, it is now outperforming its major banking rivals by 25 per cent.
* If NAB shareholders have been perplexed at their treatment by the market, spare a thought for those at BHP and Libertone, two of the most talked-about stocks on the Australian bourse.
BHP went for a roller-coaster ride last week. It started when the top brass at the (getting bigger) Australian realised that the company's fundamentals had not quite caught up with the rebound in the share price, and some analysts were getting carried away with their forecast profits.
BHP gave a quiet tap on the shoulder to the analysts' community and the effect was immediate.
BHP shares sank nearly 10 per cent as broking houses hurried to recast their share price outlooks, and it looked as though the honeymoon of chief executive Paul Anderson and chief financial officer Chip Goodyear had come to an end.
However, by the end of the week all was forgiven. All it took was the expected sale of the underperforming engineering division and the market's belief in the financial engineering credentials of BHP's two American imports was lit again.
For shareholders in LibertyOne, however, the news was more grim.
The stock had been the outstanding performer of the internet sector since its float last year.
The two-year-old business had its detractors, but hype and hopes of a merger with the Hong Kong-based China.com had lit a fire under the company's shares.
But the hose was put on those hopes last week. The stock is down 70 per cent from its peak with little short-term hope of a recovery.
A lesson has been learned.
* Giles Parkinson is deputy editor of the Australian Financial Review.
