Australia’s NAB to sell insurance stake to Nippon Life, divest British bank

NAB is expected to post its best profit ever on Wednesday with a record cash profit of A$6.3 billion ($4.57 billion) for the year-ended September 30. The figure came in below expectations.

The company used its full-year results announcement to confirm the transaction and partnership with Nippon Life – something which had been canvassed in the market as NAB entered a trading halt yesterday.

Before it can do that, British regulators had told NAB it needed to shore up Clydesdale’s balance sheet to protect against potential losses linked to past problems, including misconduct issues.

Nippon Life Insurance Co. has agreed to buy a majority stake in National Australia Bank Ltd.’s (NABZY.PK,NAUBF.PK) life insurance business and an announcement will be made Wednesday, according to media reports citing people familiar with the matter.

Australian Banking cash earnings were up 3% to $5.111 billion, reflecting higher revenue and lower bad debt charges. NAB appears well placed to deal with any regulatory changes.

Analysts estimate NAB’s life insurance arm has a return on equity of about 8 percent, compared with an overall bank ROE of 14.7 percent, and a sale would help NAB improve returns in its wealth unit.

NAB’s shares closed on Monday at $32.42 a share.

NAB’s closely-watched net interest margin contracted by 4 basis points, which it said was due to competition in business lending.

NAB will pay a final dividend of 99c to shareholders on the register on November 9.

The ratio of impaired loans fell over the past six months.

Mr Thorburn also said the bank would spend an extra $300 million on its its wealth business, over the next four years, focusing on superannuation, wealth platforms, financial advice and asset management.

National Australia Chief Executive Officer Andrew Thorburn has been pursuing a strategy to exit underperforming businesses and focus on Australia and New Zealand banking and wealth management. Revenue rose 4% on the back of stronger markets and treasury performance combined with higher volumes of housing and business lending.

Mr Ellis said the market would be mildly disappointed that the Clydesdale float was happening in February rather than this calendar year.