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NAB dividend slashed by a quarter -

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NAB dividend slashed by a quarter

The World Today - Thursday, 12 March , 2009 12:18:00

Reporter: Peter Ryan

ELEANOR HALL: The National Australia Bank has become the latest Australian lender to slash its
dividend because of the worsening financial crisis. The NAB's chief executive Cameron Clyne also
blamed rising bad debts.

Business editor Peter Ryan joins me now with the details.

So Peter how have investors reacted to this dividend cut?

PETER RYAN: Well Eleanor it seems that the market and investors are quite comfortable with this
morning's announcement, mainly because there were no shocks for a change and the bank's outlook
remains unrevised.

As a result, NAB shares roses as much as five per cent and it seems investors are mainly relieved
that the bank's overall business remains strong unlike others around the world, particularly in the
United States and Britain.

Even so, this is the first dividend cut by the NAB since 1991. The first half payout will be down
by 25 per cent and the NAB now joins the ANZ in keeping more cash on its balance sheet.

But chief executive Cameron Clyne who was speaking in a strategy update this morning said the NAB
had little choice in an uncertain world.

CAMERON CLYNE: We intend to reduce our dividend to bolster our capital position as the environment
weakens. The external environment looks increasingly challenging. Revenue growth will slow, asset
quality will deteriorate and procyclicality is unknown.

It is important that we maintain conservative settings in this environment.

ELEANOR HALL: That's the chief executive of the National Australia Bank Cameron Clyne.

Peter, did Cameron Clyne indicate if or when the dividend might be restored?

PETER RYAN: Well no sign on that and in fact Cameron Clyne was being very careful not to lock
himself into any promises, given the depth of the crisis. In fact his own economists at the NAB
have downgraded global growth to minus one per cent in 2009 and that's the lowest level since after
World War Two so the alarm bells are certainly ringing at the NAB. And earlier this week the NAB's
own business survey took manufacturing orders etc to levels not seen since the 1990s recession.

And like most banking CEOs Cameron Clyne is pessimistic about a quick recovery.

CAMERON CLYNE: It is clear that events are still unfolding internationally and I am not going to
attempt to predict the severity and duration of the global economic downturn. Quite clearly our
strategy needs to contemplate the range of plausible scenarios that could unfold.

The world is moving into a recession at a speed that was not understood six months ago. There is
great uncertainty around the speed of recovery. There are unprecedented levels of government
intervention, and whether this is purely tactical or amounts to a more permanent change in
regulation or even nationalised utilities is not yet clear.

And whilst we can't predict the future there are some no-regret imperatives in the sense of
planning for the worst and hoping for the best.

ELEANOR HALL: The NAB chief executive Cameron Clyne.

Well Peter we've just been hearing about the rising unemployment problem in Australia. There have
been lots of job cuts in the financial sector of course. Did Mr Clyne give any hints about what NAB
plans on that front?

PETER RYAN: Well Eleanor just last week there was some speculation that there could be job cuts at
the National Australia Bank but today there was no announcement whatsoever - just really a
strategic alignment of senior management positions within the bank.

More importantly Mr Clyne also confirmed that the NAB would not be selling off its British
operations. It has 2.6-million customers in Britain.

And as listeners would be aware, the British Government has been taking major stakes in banks - 95
per cent in the Royal Bank of Scotland and up to 77 per cent in Lloyds - and so Cameron Clyne would
know all too well that this is not a time to sell and get the right price.

ELEANOR HALL: Peter Ryan our business editor, thank you.