The Australian economy proved to be resilient in a global environment of ongoing economic uncertainty. This contributed to the Group delivering cash earnings growth of 19.3% from 2009 to $4.58 billion, with Business Banking and MLC & NAB Wealth playing major roles in this. Our bad and doubtful debts charge was lower than the previous year, thanks to improving economic conditions. Excluding the effects of currency and acquisitions, cash earnings rose 16.2%.

Revenue declined by 1.6% to $16.6 billion, affected by lower revenues from the Global Markets and Treasury division of Wholesale Banking as market earnings returned to more normal levels and the rebasing of the Personal Banking business. These were in turn balanced by improved revenues in Business Banking and UK Banking as these businesses repriced their lending portfolios to more closely align pricing to current market conditions. Excluding the impact of currency and acquisitions, revenues were slightly lower by 1.0% or $167 million compared with 2009.

COST MANAGEMENT

We continued to keep an unwavering focus on costs, with underlying expense growth (excluding currency and acquisitions) at 3.8%, which is in line with previous communication to the market. Ongoing investment in frontline resources and systems was partially offset by benefits from the accelerated Efficiency, Quality and Service (EQS) agenda.

Our EQS agenda continues to gain momentum in reshaping our business through reducing duplication and equipping the organisation to better serve its customers.

CAPITAL

Balance sheet strength remained a key priority for the Group in 2010 as we focused on keeping our balance sheet well capitalised and funded, with conservative liquidity settings designed to keep the bank safe.

At 30 September 2010, our Tier 1 capital ratio was 8.91%, reflecting various capital initiatives during the year. While economic conditions have improved, we’re still cautious about the strength of certain economies and therefore continue to target a strong capital position. The Group will also continue to focus on maintaining the efficiency of our capital base, despite the backdrop of a fluid regulatory landscape.

FUNDING

The global term funding environment remained mostly stable throughout the 2010 year, notwithstanding the European sovereign debt concerns that led to increased market volatility during the second quarter. Credit spreads have moderated from the same period in 2009, but still remain well above pre-crisis levels. During the full year to 30 September 2010, we raised $28.3 billion in term funding, all of which has been in unguaranteed format. The Group has grown its deposit base strongly over 2010 and remains focused on issuing longer dated debt to minimise refinancing risk.

Overall, our strong balance sheet settings have served the bank well, allowing us to manage through difficult market conditions. They have also left us relatively well positioned to meet future regulatory change and take emerging balance sheet growth opportunities. Regulatory reform is rapidly evolving and we continue to engage broadly to ensure our views are well represented.

ASSET QUALITY

Asset quality trends stabilised during the year, as the bad and doubtful debt charge of $2.3 billion was well down from its peak in the September 2009 half. This decrease was partly due to lower specific provision charges across most business units, particularly Business Banking, UK Banking, Wholesale Banking and Specialised Group Assets. In addition, the collective provisions declined, reflective of steadying credit quality trends.

FOCUS FOR THE FUTURE

Looking ahead, we will continue to focus on the development of the Australian franchise, keeping our balance sheet strong, investing in our people, and managing our efficiency and cost agenda in a disciplined way.

Mark Joiner