NAB plunges on profit warning
SYDNEY, Australia (CNN) -- Shares in Australia's biggest bank National Australia Bank plunged almost 7 percent Wednesday after it warned second half earnings could drop by as much as 15 percent.
NAB shares finished down 6.9 percent to A$28.85, slicing more than A$3 billion from its market value.
The bank said the bleak earnings outlook reflected more than the impact of recent foreign exchange losses and there would be no real improvement until the second half of next year.
A currency trading scandal that emerged in January cost the NAB A$360 million ($260 million) and led to a flurry of sackings and resignations.
The bank's former CEO, Frank Cicutto, and chairman Charles Allen both resigned in February when the extent of the currency trading breaches became clear.
Cicutto was replaced by John Stewart, the head of the NAB's business in the UK.
In a trading update released to the market Wednesday morning, Stewart said cash earnings before significant items for the six months to next September were expected to be 10 to 15 percent lower than the March 2004 half year result of A$1.85 billion ($1.33 billion).
"It is too early to forecast for the 2005 financial year," Stewart said.
"As I said in May, it will take 12 to 24 months to get our banks really motoring and so I do not expect any real improvement in the first half of 2005."
Stewart said that to retain customers, the retail bank had forgone income and incurred costs to protect its franchise.
Stewart said there had undoubtedly been a loss of competitiveness in the bank's businesses, but his objective was to put it on a path of growth driven by earnings.
In May, Stewart delivered what he said was a disappointing first half result, with cash earnings before significant items down 8.7 percent to A$1.85 billion. Net profit rose 19 percent to A$2.23 billion, helped by the sale of stakes in AMP and St George Bank.
