As the first half results from the NAB yesterday and the ANZ this morning show, spin and banking go hand in hand.
Yesterday, the National Australia Bank were talking tough and hinting at rate rises, no more rate cuts if the Reserve Bank cuts the cash rate again and warning about tough times to come. Overall the impression was for another tough 12 months with higher bad debts. NAB CEO Cameron Clyne did concede that there was a chance the Australian economy might not have as deep a recession as some people thought.
The NAB had done pretty well in a tough environment, with cash profit down 9.4% to $2 billion, on net income of $8.7 billion (a nice fat margin of 22.9%). And the dividend was cut to satisfy the bloodlust among analysts and some in the community who wanted to see someone “pay” for the slump and the credit crunch.
The NAB does have off balance sheet dodgy assets it can’t sell and has a pair of banks in the UK market that will not do well for years to come; but those won’t break the bank.
Then there’s the ANZ’s results this morning.
The cash profit wasn’t mentioned until the fine print on page seven of the report to the ASX and the accounts. It wasn’t mentioned at all in the press release.
This is how the ANZ release started:
Australia and New Zealand Banking Group Limited (ANZ) today announced an underlying profit for the first half of 2009 of $1,908 million up 20% on the preceding half (up 4% pcp).
Including net impacts from one-offs and non-continuing businesses, statutory profit grew 4% to $1,417 million compared to the preceding half (down 28% pcp).
As previously foreshadowed, the Interim Dividend of 46 cents per share fully franked is down 26% on the 2008 Interim Dividend.
And the cash profit, buried on page seven? Why it was down an unflattering 43% on the same period of 2008 to $954 million. It was down 30% from the September half of last financial year.
That compares to the March 2008 half year release when the cash profit was displayed prominently right at the top of the release.
And that brought up another bit of spin: there was much comparing of this report to the preceding half (the September half year). The usual way is to compare profits in one period with the same period of the preceding year (it’s called the pcp).
Comparisons with the previous period are made to discuss trends etc, but not comparison. Even these days there are seasonal factors (Christmas and the first quarter bring very different business conditions than in the September half year for banks).
The ANZ did it last year in the half year and full year release. It’s not good
The ANZ commentary this morning made much of comparisons with the previous half and not all that many with the pcp. That was because the comparison with the previous half wasn’t so odious, but it was with the March half of last financial year.
This is a result which confirms that the ANZ is doing it tougher than the NAB. The NAB was downgraded to a sell by local banking analysts at Citigroup this morning.
UBS, Bank of America/Merrill Lynch and Goldman Sachs JBWere were also negative on the result from the NAB, but not as gloomy as Citigroup.