Financial Performance Analysis of National Australia Bank

Running head: FINANCIAL PERFORMANCE ANALYSIS OF NAB 1
Financial Performance Analysis of National Australia Bank
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FINANCIAL PERFORMANCE ANALYSIS OF NAB 2
Abstract
Financial performance analysis is a significant aspect for any investor since it aids in
determining performance and efficient of entity’s management as indicated in financial
reports and records. It was also established that financial analysis aids in examining
organization’s efficiency and profitability as well as other signs that an entity is carried out in
rational manner. The paper aimed to evaluate financial performance of National Australia
Bank over the past three years since 2016. Based on the analysis, National Australian Bank is
considered as an Australian financial service provides that engages in provision of business
banking and personal banking services. As per the analysis, it was found out that NAB has
been experiencing improved profitability ratios. Thus, the bank has been profitable and
efficient enough in the past three years on how it handles its resources to generate income or
revenue over time. Therefore, one should consider including the bank in his or her investment
portfolio.

FINANCIAL PERFORMANCE ANALYSIS OF NAB 3
Financial Performance Analysis of National Australia Bank
I. Introduction
Financial performance appraisal is a process of determining financial and operating
features of an entity from financial and accounting statements (Fabozzi & Peterson, 2013). In
other words, it entails assessment and interpretation of organization’s financial statements in
a manner that undertakes whole diagnosis of financial soundness and profitability of an entity
(Foster, 2016). This is aimed at determining performance and efficient of entity’s
management as indicated in financial reports and records (Uotila, Maula, Keil & Zahra,
2009). As such, the paper aims to evaluate financial performance of National Australia Bank
over the past three years since 2016. The paper would be structured as follows; first, it would
begin with brief description of National Australia Bank followed by financial ratio analysis of
the bank based on profitability and operating efficiency ratios. It would then present cash
management analysis and sensitivity analysis of the company financial performance over the
past three years. Besides, the paper also identifies and discusses some of the un-systemic and
systemic risks that might influence performance of NAB. It also highlights NAB dividend
payout as well as its dividend policy through the three year period. This presents some of the
dividend policies the company might have implemented and how they keep on changing over
time. Finally, it concludes with recommendation letter as to why the client should include
NAB in his investment portfolio.
II. Financial Analysis of National Australia Bank
2.1. Description of National Australia Bank Limited
The National Australian Bank is one of the Australian financial service provides that
offers integrated and comprehensive range of financial and banking services including the
wealth management across New Zealand and Australia (National Australian Bank, 2018). In
other words, it is an Australian financial institution that engages in provision of business

FINANCIAL PERFORMANCE ANALYSIS OF NAB 4
banking and personal banking services. The firm operates under the following segments; that
is, corporate as well as institutional banking, NZ banking, Business and Private Banking,
Customer Products and Services as well as Wealth Management and Consumer Banking.
Business and Private banking division focuses on the SMEs clients that include the NAB
business franchises with some specialized government, health, community, education and
agriculture services alongside with the private banking (National Australian Bank, 2016). On
the other hand, Corporate as well as Institutional Banking division entails fixed income,
capital financing businesses, international branches, asset servicing as well as corporate
banking operations. It is amongst the fourth largest banking firm in Australia in market
capitalisation, clients and total earnings (National Australian Bank, 2018). Besides, by 2018,
the bank had around 33,283 workers across Australia including workers working across all its
subsidiaries. The bank offers personal banking under nabtrade and the UBank brands as well
as business banking including treasury, specialised finance, asset servicing and debt markets
(National Australian Bank, 2016). The bank also offers financial services and products to
insurance, retail, business and corporate clients across New Zealand. Additionally, NAB
offers business solutions including insurance, investment as well as superannuation (National
Australian Bank, 2017). NAB was formed in the year 1982 once Commercial Banking
Company in Sydney merged with National Bank of the Australia. This merge triggered
substantial offshore expansion over the years.
2.2. Calculation and Analysis of Selected Performance Ratios
Profitability
These are financial measures or metrics utilized in evaluating organization’s capacity
to generate income in relation to operating costs, shareholders’ equity, sales and balance
sheet assets over time, utilizing financial information from particular point (Easton &
Sommers, 2018). Basically, these ratios also indicate how well organizations utilize their