Economy poised for new growth, says NAB chief Cameron Clyne THE nation's bank chiefs are the most optimistic they have been since the global financial crisis, believing the economy will emerge from the doldrums. National Australia Bank boss Cameron Clyne yesterday echoed claims that the borrowing strike may end soon. But despite his optimism, Mr Clyne and his top executives will have their pay packets clipped due to ongoing headaches in Britain, where banks are raising provisions to cover the cost of mis-selling products. "Despite the fact we've had a marked improvement this year, this is a substantially better result . . . all short-term incentive payments, including mine, will be substantially down," he said. The mis-selling of payment protection insurance by British banks, including NAB's Clydesdale and Yorkshire banks, has cost the industry pound stg. 17 billion ($28.7bn). NAB's British arm took a pound stg. 130 million non-cash charge for PPI claims and could face more, staining an otherwise improved result from the troubled business that has hamstrung the group for years. Chief financial officer Mark Joiner, who is handing over to Craig Drummond, also warned that determining redress for the mis-selling of interest rate hedging was difficult and there could be additional costs. After ANZ's bumper profit announcement on Tuesday, NAB yesterday posted a rise in cash earnings to a record $5.94bn for the year to September 30, in line with expectations. Net profit rose 33.6 per cent to $5.45bn after a bad debt-plagued prior year, with revenue up 2 per cent as a four-year attack on the mortgage market powered returns. The revenue growth was offset by a 4 per cent rise in costs as NAB upgrades its core banking platform. It lifted its final dividend by 7c to 97c, slightly ahead of expectations, boosting the full-year payout to $1.90, fully franked. But with expectations high beforehand, the quality of the earnings disappointed, sending NAB shares down 2.5 per cent at $35.31. Shares in Commonwealth Bank and Westpac also ended lower, knocked by uncertainty around dividends due to fears that "domestically systemically important" banks may have to further increase capital levels. "It got there by lower bad debts, which is generally seen as a lower-quality way of getting to the number," Andrew Martin, a fund manager at Alphinity Investment Management, said of NAB. Some of the second-half trends were also a bit weak, outside of the personal bank, which was probably the highlight of the result. NAB's bad-debt charge came in at $1.93bn, down $681m and ahead of market expectations of $2.08bn. Mr Clyne said improvement in the British economy helped drive down bad debts, its commercial real estate losses improving in the second half to pound stg. 90m compared to a pound stg. 149m loss in the prior six months. In Australia, NAB's personal bank grew cash earnings 17.5 per cent to $1.2bn as its lowest advertised variable rate of the big four lured customers. But NAB's business bank, its biggest division, increased cash earnings just 3.3 per cent to $2.5bn, mainly due to lower bad debts, as demand for business credit remained subdued. NAB's wealth arm also disappointed. But Mr Clyne was hopeful on credit growth, saying the bank was "exceptionally well positioned" for an uptick after some restructuring this year. He said some competitors were loosening lending standards to win business credit, allowing NAB to de-risk its book. ANZ chief Mike Smith said on Tuesday the non-mining economy would seek more credit in the next two months, as he handed down a record cash profit of $6.5bn. "It's tough to say if this is another false dawn or the real thing," Mr Clyne said. (But) confidence is up . . . and that is the right set of conditions to hopefully lead to credit growth.