The steady improvement in National Australia Bank’s financial performance has continued this year and considerable progress was made against NAB’s strategic agenda.

This year the Annual Review integrates the Shareholder Review and the Corporate Responsibility Review, recognising that the success of our business relies on the continued goodwill of all our stakeholders.

The operating environment remained challenging. Global economic conditions included ongoing concerns about a return to recession in the United States and the United Kingdom and sovereign debt concerns in Europe. In Australia, there was subdued business credit growth, reflecting lower confidence levels along with strong competition for lending and deposits. In addition, funding costs remained at elevated levels.

Cash earnings for the year ended 30 September 2010 increased 19.3% to $4.58 billion (including acquisitions). This was achieved while important initiatives to improve reputation, including a range of fee initiatives and competitive interest rate pricing, contributed to higher customer satisfaction.

Final dividend increased by 4 cents to 78 cents (fully franked), taking the dividend for the year to $1.52, an increase of 6 cents.

Improved shareholder returns through sustainable business performance, a focus on the strong Australian franchise and working to build NAB’s brand and reputation, remains a core strategic focus.

As well as organic investment in the Australian franchise, the integration of three acquisitions – Aviva Australia’s wealth management business, Advantedge (formerly the mortgage management business of Challenger) and JBWere – progressed well.

In December 2009, NAB announced a counter bid to AMP’s offer to acquire the Australian and New Zealand business of AXA Asia Pacific Holdings. This represented an attractive opportunity to accelerate NAB’s wealth management strategy.

In September 2010, the Australian Competition & Consumer Commission decided not to accept undertakings provided to address competition concerns on this proposed transaction and the agreement for NAB to acquire the AXA businesses was terminated.

While this was a disappointing outcome, the MLC & NAB Wealth business, which has a sound reputation based on trust and transparency, strong brands and a market-leading position in many segments, remains well placed to continue to grow.

The Board is confident that NAB has the right strategic agenda in the current environment and is well positioned to take advantage of any improvement in operating conditions.

NAB also engaged in the ongoing consultation around potential regulatory reform, with the key objective of ensuring that regulation provides the right balance between risk management and providing flexible and efficient banking services.

I would like to take this opportunity to thank all of the Group’s employees for their efforts this year. Their commitment is the foundation for the progress we have made.

Also on this website, Group CEO Cameron Clyne covers the progress against NAB’s strategic objectives by business unit and Executive Director Finance, Mark Joiner, provides the detailed financial commentary.

I hope this new-style Annual Review is informative and useful in understanding NAB’s strategy and performance.

Michael A Chaney AO