Australian Stocks, Dollar Down; NAB Net Falls

Darlington Musarurwa
28 Oct, 2009
New York City

Stocks and dollar in Australia declined as commodities prices fell and market valuation remain stretched after seven months of rally. Australia consumer price index rises 1% in three months to September. National Australia Bank annual profit drops 42.9% to A$2.6 billion.

[R]3:00AM New York, 7:00PM Sydney – Stocks and dollar in Australia declined as commodities prices fell and market valuation remain stretched after seven months of rally. Australia consumer price index rises 1% in three months to September. National Australia Bank annual profit drops 42.9% to A$2.6 billion.[/R]

The benchmark stock index in Australia extended losses led by financial stocks after National Bank of Australia became the first financial institution to record a loss after the collapse of Lehman Brothers in September 2008.

The lender was weighed by A$3.8 billion provision for bad and doubtful debts and A$542 million set aside for a tax bill in New Zealand.

Inflation rose 1% in three months to September after rising at 0.5% in the previous quarter. The report eased concerns the Reserve Bank of Australia may opt for a smaller increase in its key rate.

In Sydney trading ASX 200 Index fell 1.4% or 68.4 to 4,685.10.

Of the ASX 200 Index stocks, 51 gained, 151 declined, and 12 were unchanged. Paperlinx led gainers in the index shares with a rise of 4.7% followed by AWB gaining 3.3%.

The Aussie fell 0.8% to 90.91 U.S. cents as it retreats from its one-year high. In the last five years the Australian dollar has traded above 90 U.S. cents in three time periods and averaged near 70 U.S. cents.

Australia Inflation Rises 1% in September

Australia Bureau of Statistics reported today that the country’s Consumer Price Index, which measures the rate of increase of prices, gained 1% in the three months to September from a 0.5% increase the previous quarter.

The index also advanced 1.3% through the year to September quarter 2009.

Significant price rises in the period were for electricity 11.4%, automotive fuel 4%, water and sewerage 14.1%, deposit and loan facilities 3.0% and house purchase 1.1%.

However, price declined for financial services 2.3%, vegetables 5.6%, fruit 5.4%, pharmaceuticals 4.4% and audio, visual and computing equipment 2.2%.

NAB Profit Falls 42.9%

National Australia Bank reported today that its net annual profit dropped 42.9% to A$2.6 billion as bad and doubtful charge gained A$2.3 billion to A$3.8 billion, excluding the charges related to collateralized asset backed securities booked in the previous year.

The increase in the bad debt charge was driven by higher specific provisions in the SME and corporate portfolios in all regions.

Group revenues, however, increased 9.7% to A$16.9 billion, but cash earnings fell 1.9% to A$3.8 billion.

In Australia, cash earnings declined 5.3% to A$2.8 billion. Business & Private revenue rose 11.3% as a result of success of the iFS and Specilisation operating models, particularly In the SME, Agri and Health businesses.

Revenue growth was offset by provisions for bad debts, which climbed from A$603 million to A$1.6 billion.

NAB also reserved A$542 million for a tax bill in New Zealand after the regulatory authorities reviewed the structured finance transactions it carried out.

Chief executive officer Cameron Clyne said its performance in 2009 has foundations of good revenue growth that are “key to ensuring sustainable business momentum and shareholder returns.”

ASX Movers

Macmahon Holdings Limited led the decliners in the S&P ASX 200 index with a loss of 8.0% followed by losses in Bradken Limited of 7.7%, in Nexus Energy Limited of 7.0%, in Abacus Property Group 6.6% and in Transfield Services Limited 6.6%.

PaperlinX Limited led gainers in the S&P ASX 200 index with a rise of 4.7% followed by gains in AWB Limited 3.2%, in Sundance Resources Limited of 3.2% and in Goodman Fielder Limited of 3.1%.

Other Movers

Babcock & Brown Infrastructure Group added 2.8% to A$0.03 after the specialist infrastructure company said Brookfield received regulatory approval to acquire up to 40% stake.

Bradken Limited the supplier of tools and services to mining companies decreased 7.7% or 52 cents to $6.18.

Centennial Coal Company Limited rose 1.9% to A$3.19 after producer of the fuel was upgraded at Credit Suisse Group AG and Royal Bank of Scotland Group Plc.

Commonwealth Bank of Australia slipped 3.8% to A$53.03 has settled a contentious and possibly expensive court action brought by two former high-profile traders, days before the NSW Supreme Court was to begin hearing the case.

Goodman Group rose 0.8% to A$0.60 after the real-estate trust was upgraded to “buy” from “hold” at Goldman Sachs Group Inc.

Macmahon Holdings Limited, the civil construction and mine contracting company, fell 8.0% to A$0.58.

National Australia Bank Limited fell 2.8% to A$29.83.

Nexus Energy Limited slipped 7.0% to A$0.33 after the energy-related projects investor brought on stream its wholly owned Longtom natural gas field in Bass Strait.

PaperlinX Limited the engaged in the distribution and sale of printing and publishing papers rose 4.7% to A$0.56.

Nexus Energy dropped 7%, while other commodity stocks fell as gold prices shed 0.7% to 1,035 per ounce. Panoramic Resources plunged 6.4% and Atlas Iron declined 6.3%.

However, crude oil prices gained 1.1% to $79.6 per barrel.

Property stocks fell on the worries that the interest rates may be revised higher at the RBA meeting on November 3. Abacus Properties edged up 6.7% and FKP Properties surged 5.6%.

Financial stocks declined as National Australia Bank reported a 42.9% drop in profit for the year. Bank Queensland declined 4.4%, Commonwealth Bank Australia plunged 3.8% and National Australia Bank tumbled 2.8%.