By Swati Pandey
SYDNEY (Reuters) - National Australia Bank (AX:NAB) said it has made exiting its UK operations an "absolute priority" after writedowns for the troubled business led to a 10 percent decline in annual cash profit.
Chief Executive Officer Andrew Thorburn, who took the helm in August, has moved quickly to clear up problem areas at Australia's fourth-biggest lender by market value.
He has also offloaded a minority stake in its U.S. unit, Great Western Bancorp Inc, via a public offering, sold a big chunk of UK non-performing loans and shuffled key management roles.
NAB's UK business, which includes Yorkshire and Clydesdale bank branches, has been a persistent thorn in its side, with charges for bad and doubtful debt responsible for annual profit declines four times since 2008.
"I think what's really positive is that they have reinforced that they want to get out of UK," said Omkar Joshi, a Sydney-based investment analyst who helps oversee about A$1 billion at Watermark Funds Management Pty, adding that he will also consider buying more shares in the bank.
NAB said it is examining a range of options for the UK business, including a public float, as its operations had improved to the point where it could get sufficient value out of a sale.
Annual cash earnings at the UK business nearly doubled to 158 million pounds while net interest margin, a core measure of profitability, rose 10 basis points to 2.22 percent.
"We have an intention to exit the UK, we think there's an opportunity now that probably wasn't there before. What we are signalling is that's our intent, it is an absolute priority," Thorburn told reporters.
NAB paid 420 million pounds for its Clydesdale branches in 1987 and around 900 million pounds for the Yorkshire business in 1990.
Thorburn also said the bank needed urgency in dealing with its low-returning assets, including its wealth management arm.
NAB's overall cash earnings for the year to Sept. 30 fell to A$5.18 billion ($4.6 billion), down from a restated A$5.75 billion and marking its second profit drop in three years.
Much of the decline, flagged this month with a profit warning, was due to A$1.4 billion in charges related to misconduct in the sale of payment-protection insurance and interest rate hedging products by its UK arm.
Though revenue grew 1.9 percent to A$18.9 billion, group net interest margin dropped 9 basis points to 1.94 percent, the lowest level since September 2005. Thorburn said he expected competitive pressures to continue to squeeze margins.
Shares of NAB, valued by the market at $72 billion, have risen about 7 percent since its Oct. 9 profit warning, outperforming the benchmark S&P/ASX 200 index (AXJO).
On Thursday, they were up 0.7 percent at A$34.4 per share in a firm Sydney market.
(Additional reporting by Lincoln Feast and Thuy Ong; Editing by Edwina Gibbs)