The ghosts of the past continue to haunt John Stewart and his new “A players” at National Australia Bank.

The
second half of the bank’s 2005 financial year revealed another episode
of overcharging customers, more staff redundancies, worse than expected
problems with risk management systems and a blow-out in costs as the
new management team continue the struggle to turn the listing ship
around onto a new course.

NAB’s once-mighty Australian retail
banking engine is still not firing on all cylinders and the group
results would have been dismal without the benefits that a bull
stockmarket brings to the wealth management business.

“You heard
me say many times that it would take about three years to turn this
group around,” said chief executive John Stewart at yesterday’s results
briefing. “We’re about half way through and you’ll see the signs in
this result that [the turnaround] is completely on track,” he added.

The
best measure of the underlying performance of the business may be
after-tax cash earnings. After eliminating outside equity interests,
the bank reported a 3.7 per cent fall in profit from $3.65 billion in
2004 to $3.51 billion this year. The second half result of $1.80
billion was up by five per cent on the $1.71 billion for the six months
to March.

Banking performance in Australia and the UK declined
in both the year and the second half. Australian banking was down 6.6
per cent on the previous year – from $1.99 billion to $1.86 billion –
and the second half was down 4.3 per cent on the six months to March –
from $951 million to $910 million. UK banking was down 16.5 per cent on
the year – from $855 million to $714 million, although around $80
million was due to the loss of earnings from the Irish banks that were
sold in February. Half on half, banking earnings were down 13.6 per
cent – from $383 million in March to $331 million in the second half.

The
two banking divisions that did increase cash earnings for the year both
came off the boil in the second half with flat results compared to the
first six months. Earnings were up in New Zealand for the year by 4.2
per cent – from $457 million to $476 million, but were flat for the
second half at $238 million.

Institutional Markets &
Services increased cash earnings by 5.6 per cent from $666 million in
2004 to $703 million in 2005, but the second half was down marginally
to $350 million from $353 million in the six months to March.