National Australia Bank Ltd (NAB) will cut 4.6 percent of its global staff in an effort to boost earnings growth by a quarter. Some investors expected more firings as the nation's largest lender lags rivals.
NAB stock fell as much as 1.8 percent after Chief Executive Frank Cicutto announced plans to cut 2,050 jobs and said earnings-per-share will rise as much as 10 percent this year and 12 percent in each of the following two years.
"It's hard to see how they'll achieve EPS growth targets," said Albert Hung, who manages A$800 million (US$424 million) at Tower Asset Management. "The market expected higher headcount reduction. They'll have to rely on revenue growth."
NAB, the biggest Asia-Pacific bank outside Japan, has lagged rivals Commonwealth Bank of Australia, Westpac Banking Corp and Australia & New Zealand Banking Group Ltd in holding down costs and driving earnings growth as it sought to expand in the UK.
The Melbourne-based bank's fiscal 2001 net income fell 36 percent to A$2.1 billion after it wrote down A$2.2 billion at its US-based HomeSide Lending Inc unit. Westpac, ANZ and Commonwealth Bank all posted record earnings last year.
NAB said its Australian banking cost-to-income ratio, a key measure of profitability, will improve to about 45 percent by 2004. Rival ANZ's total cost-to-income ratio improved to 48.2 percent in the six months to Sept. 30, compared with 54 percent at National Australia.
The bank will book a restructuring charge of as much as A$225 million this year, and is seeking cost savings of A$370 million a year by 2004.
"There was talk the job cuts could be as high as 5,000, so the figure has come in lower than expected," said Mark East, who helps manage A$4 billion at State Street Global Advisors.
The lender reports first-half earnings next month. It's looking to its money management business and its UK operations to drive profit growth, Cicutto said.
It plans to invest A$200 million in its Australian funds management business over the next three years, and a further A$90 million to expand this business in the UK, where its MLC managed funds unit recently started operations.
NAB accounts for more than one-fifth of net retail fund inflows in Australia after paying A$4.6 billion for MLC two years ago. It had more than A$700 million of net inflows from individual investors in the quarter to December.
The Australian bank owns Clydesdale, Yorkshire, Northern and National Irish banks in the UK and Ireland, where it has more than 4 million customers and earned A$976 million last year.
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