The last year has been one of great turmoil in the global financial system, with banks and other financial institutions collapsing or being rescued by governments, and developed economies experiencing decline and, in some cases, deep recession.

In this environment it is gratifying that National Australia Bank has remained well capitalised and profitable, and is now rated as one of the safest banks in the world. This has enabled us to continue to support our customers and the communities in which we operate.

Cash earnings for the bank fell by around 2%, marking a second year when large bad debts and write-offs reduced an otherwise improved underlying profit. In the past year, increased funding costs also affected profitability.

The main focus of the company during the year was on keeping the bank safe, and almost $8 billion of new share capital was raised through dividend reinvestment, placements and share purchase plans. While the directors would always have a preference for raising ordinary equity through pro-rata rights issues, the increased risks associated with extended offer-open periods and short-selling activities in a volatile market precluded this as an acceptable avenue this year.

With an increased number of shares on issue and flat profits, dividends fell to $1.46 per share from $1.94 in the previous year.The final dividend of 73 cents is fully franked and will be paid on 17 December 2009. Notwithstanding the external financial turmoil, the company was able to take advantage of some growth opportunities during the year, with acquisitions in insurance, wealth management, mortgage distribution and retail banking supplementing organic growth in our domestic banking franchise.

At the same time, we continued to invest in the communities in which we operate. Notable achievements were the launch of our Reconciliation Action Plan for Indigenous Australians, a successful year for the Schools First education program and continued investment in programs that improve access to financial services for the disadvantaged.

The Board remains cautiously optimistic about the outlook for the Australian economy where our largest operations are based, and it is confident that the Company is well placed to take advantage of opportunities as they occur.

During the year, we farewelled John Stewart as Group Chief Executive Officer and appointed Cameron Clyne as his replacement. We thank John for his considerable efforts in steering the bank through some difficult times and we wish Cameron every success as he takes the organisation forward.

Banking is a people business and we acknowledge the great effort made by all employees – from the Chief Executive down – in keeping the bank safe and strong over the past year.

Michael A Chaney AO
CHAIRMAN