#1National Australia Bank 2012 HALF YEAR RESULTS Investor presentation 10 May 2012 Cameron Clyne, Group Chief Executive Officer Mark Joiner, Executive Director Finance National Australia Bank Limited ABN 12 004 044 937 <nab MLC C Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank Note: Information in this document is presented on a cash earnings basis, unless otherwise stated. Cash earnings is a key financial performance measure used by NAB, the investment community and NAB's Australian peers with a similar business portfolio. NAB also uses cash earnings for its internal management reporting as it better reflects what NAB considers to be the underlying performance of the Group. It is not a statutory financial measure and is not presented in accordance with Australian Accounting Standards nor audited or reviewed in accordance with Australian Auditing Standards. "Cash earnings" is calculated by excluding some items which are included within the statutory net profit attributable to owners of the company. A definition of cash earnings is set out on page [150] of the 2012 Half Year Results Announcement. A discussion of non-cash earnings items and a full reconciliation of the cash earnings to statutory net profit attributable to owners of the Company for the March 2012 half year is included on pages 22 and 141 of the 2012 Half Year Results Announcement. The Group's financial statements, prepared in accordance with the Corporations Act 2001 (Cth) and Australian Accounting Standards, and reviewed by the auditors in accordance with Australian Auditing Standards, are included in section 5 of the 2012 Half Year Results Announcement. Disclaimer: This document is a presentation of general background information about the Group's activities current at the date of the presentation, 10 May 2012. It is information in a summary form and does not purport to be complete. It is to be read in conjunction with the National Australia Bank Limited Half Year Results filed with the Australian Securities Exchange on 10 May 2012. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate. This announcement contains certain "forward-looking statements". The words "anticipate", "believe", "expect", "project", "forecast", "estimate", "outlook", "upside", "likely", "intend", "should", "could", "may", "target", "plan" and other similar expressions are intended to identify forward- looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. For further information visit www.nab.com.au or contact: Ross Brown Executive General Manager, Investor Relations Mobile | +61 (0) 477 302 010 Craig Horlin Senior Manager, Investor Relations Mobile | +61 (0) 417 372 474 Brian Walsh General Manager, Media and Public Affairs Mobile +61 (0) 411 227 585 Meaghan Telford Head of Group Media Mobile | +61 (0) 457 551 211 National Australia Bank#2Solid result and progress against strategy Half year to Mar 12 Sep 11 Change (%) Mar 11 Change (%) Revenue ($m) 9,108 8,795 3.6% 8,799 3.5% Underlying profit ($m) 5,156 4,812 7.1% 4,808 7.2% 3 Cash earnings ($m) 2,828 2,792 1.3% 2,668 6.0% Core Tier 1 ratio 8.03% 7.58% 45bps 7.12% 91bps Dividend 90 88 2.3% 84 7.1% (100% franked cps) Cash ROE 15.0% 15.2% (20bps) 15.1% (10bps) Statutory net profit attributable 2,052 2,791 (26.5%) 2,428 (15.5%) to owners ($m) National Australia Bank Environment remains challenging System credit growth % change year-on-year Increased cost of funding an Australian variable rate mortgage 18 16 Australia 14 12 160 (F) the RBA 140 cash rate (bps) 120 Funding cost over Recovery via repricing 10 100 Liquidity Portfolio Costs Term Funding 8 6 80 New Zealand 4 60 Customer Deposits 2 United Kingdom 40 0 -2 20 -4 Bank Bill/Overnight Index Swap Spread Jan 90 Jan 93 Jan 96 Jan 99 Jan 02 Jan 05 Jan 08 Jan 11 Jan 14 RBA, RBNZ, Bank of England, NAB Forecasts Pre-crisis Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Mar 12 Ongoing full regulatory agenda Key global reforms Quarterly real output path during UK recessions¹ (%) Basel III Capital & Liquidity Systemically Important Financial Institutions 106 Recovery & Resolution - 'Living Wills' Reforms for Over-The-Counter derivatives (inc. clearing arrangements) 104 Key domestic reforms 102 Financial Claims Scheme 100 Future of Financial Advice Superannuation Reforms 98 Life Insurance and General Insurance Capital Framework > National Consumer Credit Protection Phase II 96 Other key international reforms Dodd-Frank reforms (US) Foreign Account Tax Compliance Act (US) ▸ Independent Commission on Banking - Business Models (UK) > International Financial Reporting Standards 9 - Financial Instruments 4 (1) Previous peak = 100. Source: NAB Economics, UK Office of Budget Responsibility ཚ ོ སྐྱ ོ March 2008 onwards Early 1980s 1Q 2Q 3Q 4Q 5Q 6Q 7Q 8Q Mid 1970s Early 1990s 1930s 9Q 10Q 11Q 12Q 13Q 14Q 15Q National Australia Bank#35 6 Continued focus on strategic priorities To deliver sustainable, satisfactory returns to shareholders Balance sheet strength Efficiency, quality & service People, culture & reputation Portfolio ▸ Keep the bank safe ▸ Strong capital, funding and liquidity ▸ Tight controls and risk settings ▸ Transform the way we do business ▸ More competitive cost structure ▸ Reduce operational risk ▸ Replace ageing infrastructure ▸ Improve customer experience and service delivery ▸ Differentiate for our people, customers and communities ▸ Shape our future environment ▸ Focus in Australia ▸ Maintain value and options internationally ▸ Wholesale banking refocused on core franchise National Australia Bank Good progress against strategic priorities Balance sheet strength¹ ▸ Core tier 1 ratio up from 6.6% to 8.0% ▸ Stable Funding Index improved from 76% to 85% ▸ Liquids up $22bn to $90bn ▸ Collective Provision and GRCL top-up coverage of CRWA (ex housing) up from 1.38% to 1.76% Efficiency, quality & service ▸ CAGR cost growth 1.6% over three years ▸ Positive jaws over last three halves ▸ Continuing to invest ($955m FY10, $1,160m, FY11, $516m 1H12) ▷ 1/3rd of transformation programme completed - NextGen on track People, culture & reputation ▸ Differentiated customer proposition ▸ Customer satisfaction up from 69.0% to 79.3% since Mar 092 ▸ Employee engagement remains above global finance industry norms, continual improvement since FY09 ▸ Employer of Choice for Women for the sixth year in a row Portfolio ▸ Australian & New Zealand loan and deposit market share growth ▸ Portfolio shift to mortgages reduces concentration of risk and averages up returns ▸ SGA run-off progressing - RWAs down $17.3bn (68%) since Sep 09 and SCDO risk closed out ▸ Wholesale banking customer income 14% CAGR (Sep 08 to Mar 12) ‣ UK CRE assets to be run-off; implement simplified business model (1) All figures since 31 March 2009 (2) Roy Morgan Research, Aust MFIs, population aged 14+, six month moving average. Customer satisfaction is based on customers who answered very/fairly satisfied. NAB compared with the weighted average of the three major banks (ANZ, CBA, WBC) National Australia Bank#4Market share gains Australian housing lending market share¹ Australian business lending market share¹ 14.5% 14.7% 21.5% 22.1% 22.2% 22.4% 22.9% 13.8% 20.5% 13.3% 12.8% 12.8% Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Australian household deposit market share² New Zealand market share³ 22% 20% 18% 14.5% 14.1% 14.2% 16% 13.4% 13.6% 13.1% 14% Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 (1) RBA Financial System 7 (2) APRA Banking System (3) RBNZ (historical market share rebased with latest revised RBNZ published data) Sep 09 Housing Mar 10 Sep 10 Agribusiness Mar 11 Sep 11 Retail deposits Mar 12 National Australia Bank Transfer UK CRE assets to NAB and put into run-off Rationalise Financial Solutions Centres (FSC) footprint UK CRE run-off profile - contractual maturity¹ (£bn) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 2012 2013 2014 2015 2016 2017 2018 Costs and benefits profile West 14 FSCs Current: 17 Scotland 13 FSCs Current: 16 South 9 FSCs Current: 31 East 8 FSCs Current: 9 Total UK CRE provision coverage Mar 12 Total costs and impact Total Group Capital on Group capital ratio (£m) (£m) bps 4.4% Restructuring 195 (159) (7) Goodwill write-off 141 2.5% 11.9% PPI 120 (120) (5) 2.4% 7.5% Total 456 (279) (12) 2.6% Forecast Benefits (£m) FY13 FY14 FY15 Actual 35 63 74 Specific Collective Provision Prov UK CRE overlay Total prov Partial Write-offs Implied CRE Coverage Cumulative FTE² 831 958 987 (1) Reflects contractual maturity which is subject to ability of customers to refinance or repay on maturity 8 (2) This includes 191 transferred roles to NAB associated with the CRE portfolio and excludes current year initiatives National Australia Bank#59 10 Balance sheet strength Collective provisions and GRCL top-up to credit risk weighted assets peer comparison¹ Collective provisions and GRCL top-up to credit risk weighted assets (%) (%) 1.20% 1.25% 1.32% 1.29% 1.45% 1.44% 1.41% 1.32% 0.10% 0.30% 0.07% 0.31% 0.32% 0.31% 0.30% 1.20% 1.15% 1.22% 1.02% 1.14% 1.12% 1.10% 1.02% Peer 1 Peer 2 NAB Collective Provision GRCL top-up Peer 3 Sep 10 Mar 11 Sep 11 Mar 12 Collective Provision GRCL top-up Basel II core tier 1 ratios peer comparison¹ (%) Basel II core tier 1 ratio (%) 8.92% 8.03% 8.03% 7.67% 7.96% 7.58% 6.91% 6.80% 7.12% Peer 1 Peer 2 NAB Peer 3 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 (1) Peer ratios as last reported National Australia Bank Transforming the way we do business Key programmes Significant achievements Infrastructure & Network Transformation ▸ Contact centre voice infrastructure rollout near completion ▸ Signed deal for new secure technology data centre, to be opened in 2013 Re-platforming Programme (NextGen) ▸ Successful implementation of major technology foundational release of NAB's new banking platform Customer Process Transformation ▸ Broker channel service uplift - ranked 5th in 2010, now 1st in The Adviser Third Party Banking Report Major Lenders 2012 ▸ Enhanced mobile solutions FY12 priorities ▸ Contact centre voice infrastructure completion ▸ Continue to progress payments systems replacement ▸ Continue to upgrade technology infrastructure ▸ Build customer relationship management and single customer view capability ▸ Test new credit risk engine ▸ Deploy funds transfer pricing capability ▸ New private client platform launch ▸ Extend UBank product capabilities ▸ Continue transforming customer processes to provide a better banking experience National Australia Bank#6Reputation and Corporate Responsibility Personal Banking MFI customer satisfaction¹ Customer (%) 74.1 -5.1% 79.3 0.8% 78.5 69.0 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Weighted average of three major bank peers Mar 12 NAB ► Lowest SVR of the major banks since June 2009 ▸ First to abolish overdrawn and monthly account service fees on personal transaction accounts ► Customer satisfaction reached a 15 year high during 1H121 Net new transaction accounts have grown 12 fold since 1H09 ▸ Microfinance program continues to grow with $130m committed to helping Australians with low incomes Recognition People and Community ► Investment in education through NAB Schools First which supports school/community partnerships ▸ Total days volunteered 25,633 during 2011 ▸ Australia's #1 arranger of project finance to Renewable Power, having arranged over $1.3bn across wind farms, biomass and landfill gas projects over last six years² ▸ One of two launch signatories to the United Nations Environment Program, Finance Initiative 'Natural Capital Declaration' TOAGE OF THE YEAR MORTGAGE GOLD WINNER Money MAGAZINE AWARDS 2011 HOME TENDER WORLD'S MOST ETHICAL COMPANIES WWW.ETHISPHERE.COM OF THE YEAR EOWA Employer of Choice for Women 11 (1) Roy Morgan Research, Aust MFIs, population aged 14+, six month moving average. Customer satisfaction is based on customers who answered very/fairly satisfied. NAB compared with the weighted average of the three major banks (ANZ, CBA, WBC) (2) NAB analysis ranking against four major domestic banks - cumulative volume. Data Source: Project Finance International 2006-2011 APAC MLA League Tables US$ Project Allocation. UNITED NATIONS WORLD ENVIRONMENT DAY AWARDS CATEGORY WINNER ASSOCIATION OF AUSTRALIA 2011 National Australia Bank 12 Summary ▸ Global macro outlook still challenging – likely to remain so ▸ Balance sheet strength and cost discipline provide strong foundation Good progress on our strategic priorities but still more to do execute on UK business model change - continue to advance technology deployment - maintain momentum in Australian franchise - further develop NAB's reputation with customers, employees and community ▸ Focused on improving returns National Australia Bank#714 National Australia Bank 1H12 Financials <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank Group financial result Half year to Mar 12 Sep 11 Mar 11 ($m) Change on Sep 11 Change on Mar 11 Net interest income 6,708 6,788 6,304 (1.2%) 6.4% Other operating income 2,400 2,007 2,495 19.6% (incl NAB Wealth) (3.8%) Net operating income 9,108 8,795 8,799 3.6% 3.5% Operating expenses (3,952) (3,983) (3,991) 0.8% 1.0% Underlying profit 5,156 4,812 4,808 7.1% 7.2% B&DDs (1,131) (834) (988) (35.6%) (14.5%) Cash earnings 2,828 2,792 2,668 1.3% 6.0% Cash ROE 15.0% 15.2% 15.1% (20bps) (10bps) NIM 2.17% 2.28% 2.23% (11bps) (6bps) Core Tier 1 ratio 8.03% 7.58% 7.12% 45bps 91bps Spot GLAS ($bn) 490.4 482.1 459.2 1.7% 6.8% National Australia Bank#8Strong Wholesale Bank performance offset by UK Cash earnings - attribution analysis by business (constant currency) 15 ($m) 251 (204) 0 (36) 44 55 (32) (39) (3) 2,792 2,828 Sep 11 Business Banking Personal Banking Wholesale Banking UK Banking NZ Banking NAB Wealth SGA Other 1 FX Mar 12 Cash earnings - attribution analysis by P&L line items ($m) 2,792 (80) 393 31 (297) (45) 34 34 2,828 Sep 11 NII OOI Costs B&DD Tax Other Mar 12 (1) Other comprises Group Funding, Group Business Services, other supporting units, Asia Banking and GWB Net interest margin impacted by funding costs Group net interest margin - half-on-half attribution analysis 16 National Australia Bank 0.03% (0.04%) (0.05%) (0.03%) 0.02% (0.03%) (0.01%) 2.28% Customer margin down 6bps 2.17% Sep 11 Lending Margin Deposits Funding & Lending Mix Liquidity Costs Markets & Liquids Treasury (volumes) Other Mar 12 Business unit net interest margin Group net interest margin Margin (%) Mar 12 Customer margin¹ 2.60% change on Sep 11 change on Sep 11 2.40% Business Banking 2.56 (10bps) (9bps) 2.20% Personal Banking 2.02 (15bps) (12bps) 2.00% UK Banking 2.09 (24bps) (17bps) 1.80% NZ Banking 2.41 6bps 3bps Group 2.17 (11bps) (6bps) (1) Customer margin comprises lending margin, deposit and funding costs and liability mix 2.19% 2.17% Mar Sep Mar Sep Mar Sep Mar Sep Mar 08 08 09 09 10 10 11 11 12 Group NIM Group NIM (ex markets & treasury) National Australia Bank#917 18 Maintaining positive jaws and continuing to invest Jaws momentum (ex SCDO and FX) Expense growth 4.2% 5.0% -2.9% Revenue 1.7% 1.3% growth +3.3% 2.3% 2.4% +1.7% 0.6% 1H11 v 2H10 2H11 v 1H11 2H10 v 1H10 Full time equivalent employees (#) Investment spend +3.1% -0.7% 1H12 v 2H11 ($m) 522 638 516 4% 2% 6% 58% 65% 60% 45,198 45,293 44,645 43,399 25% 25% 23% 13% 8% 11% Sep 10 Mar 11 Mar 11 Sep 11 Mar 12 Sep 11 Mar 12 ■Compliance ■Infrastructure Efficiency and Revenue Other Group B&DD increase reflects UK/SGA B&DD charge UK Banking B&DDs (£m) National Australia Bank ($m) 282 2,004 253 1,811 515 85 377 183 1,230 1,033 1,131 145 164 151 145 988 322 834 279 428 241 126 95 56 48 1,434 1,489 221 197 908 754 747 613 703 108 95 97 57 69 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 ■Group B&DD charge (ex UK Banking) UK Banking B&DD charge CRE Non CRE B&DD charge to GLAS - compared to norms 0.82% 0.87% 0.57% 0.51% 0.46% 0.43% 0.38% B&DDs by business (constant currency) ($m) (45) 31 14 63 52 212 (30) 1,131 834 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 NAB long term average 1980 - 2011 (42bps) NAB benign period average 1994 - 2007 (24bps) Sep 11 Business Personal Wholesale UK Banking Banking Banking Banking SGA Other offshore Other & Mar 12 FX B&DD charges as a % of GLAS (annualised) B&DD charges as % of GLAS (ex UK Banking) (annualised) National Australia Bank#1020 20 19 Asset quality and coverage ratios Categorised assets by balance ($bn) 28 90+ DPD & impaired assets as a % of gross loans and acceptances by product 2.0% 7.0% 24 20 16 12 1.5% 6.0% 5.0% 1.0% 4.0% 3.0% 0.5% 2.0% 1.0% 0.0% 0 0.0% Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Watch Loans 90+ Days Past Due I Impaired Assets Categorised Assets as % of GLAS Collective provision ($m) 3,398 Sep 11 Retail 12 (159) (160) 10 (43) Business Banking Business lending volumes¹ ($bn) 129.1 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 ■Mortgages Impaired Business Impaired ■Mortgages 90+ DPD Business 90+ DPD Retail Unsecured 90+ DPD Coverage ratios (including GRCL top-up) 50% 1.5% 1.45% 0.31% 1.44% 1.41% 1.32% 40% 0.32% 0.31% 0.30% 30% 1.0% 20% 1.14% 3,058 0.5% 1.12% 1.10% 1.02% 10% Mar 12 0.0% 0% Sep 10 Mar 11 Sep 11 Mar 12 GRCL top-up (pre-tax) as a % of Credit Risk Weighted Assets (LHS) Collective Provisions as a % of Credit Risk Weighted Assets (LHS) Specific Provisions as a % of Gross Impaired Assets (RHS) (%) 0.6 0.1 1.4 0.7 0.4 (0.1) SME3 B&DD charge ($m) (21%) (38%) 130.1 263 190 157 Corporate, Specialised Banking Institutional & nabbusiness 154 Working Capital 41% Services Mar 12 Business lending market share² National Australia Bank 22.9 22.2 22.4 22.1 132.2 Sep 10 Mar 11 Sep 11 Mar 12 Net interest margin (%) 2.66 2.57 2.56 2.50 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 (1) Updated to reflect transfers of customers between business units (2) RBA Financial System/NAB (3) SME business data reflects the nabbusiness segment of Business Banking which supports business customers with lending typically up to $25m, excluding the Specialised Businesses National Australia Bank Impaired 90+DPD#11Personal Banking Sequential margin analysis 0.07% (0.06%) (0.11%) (0.02%) (0.04%) 0.01% 2.17% Customer margin down 12bps 2.02% Mar 12 Other Lending Mix Liability Mix Funding & Liquidity Costs Deposits Lending Margin Sep 11 Home loan multiple of system growth¹ (x) B&DD charge ($m) 262 220 231 116 16 163 169 138 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Australian mortgages - cumulative 30+ DPD 4.5% 4.0% 3.5% 3.4 3.3 3.0% 2.7 2.5% 2.2 2.0% 1.1 1.5% 1.0% 0.5% 0.0% Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 0 3 6 9 12 Months on books 15 18 21 24 ―2006 2007 2008 2009 2010 2011 2012 21 (1) RBA Financial System/NAB 22 Wholesale Banking Cash earnings and underlying profit ($m) National Australia Bank Steady growth in customer income ($m) 1,219 997 895 859 495 426 174 754 375 541 518 428 393 400 302 268 685 724 520 571 Sep 10 Mar 11 Cash earnings Sep 11 Mar 12 Underlying profit B&DD charge ($m) 16 10 (12) Sep 10 Mar 11 Customer Sep 11 Risk Mar 12 ⚫ Customer comprises Sales, Asset Servicing, Specialised Finance and Financial Institutions Group ⚫ Risk comprises FICC and Treasury Risk income ($m) 20 905 20 47 738 15 15 429 33 495 420 426 10 404 362 375 200 92 148 158 169 174 476 5 270 318 256 268 206 107 295 67 Sep 10 Mar 11 Sep 11 Mar 12 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 VaR (traded) (RHS) Treasury FICC Mar 12 National Australia Bank#12NAB Wealth Investments cash earnings ($m) 14 1 (8) (4) 2 162 167 Insurance cash earnings ($m) 72 7 6 93 Sep 11 Annuity Experience (incl MtM FUM/ volumes invest. Profits) Underlying Margins (Business Mix & Pricing) Private Wealth volumes & Other Mar 12 Sep 11 PIF Claims Policyholder Mix & Lapses margins Allocated Financial Planner revenue Mar 12 Movement in FUM¹ Premiums inforce ($bn) ($m) 2.1% 2.1% 1.8% 73% 7.0 67% 0.1 72% (8.4) 7.7 (0.4) (1.5) 119.0 110.3 123.5 1,407 1,436 1,466 1,493 Mar 11 Net flows Investment Other Sep 11 Net flows Investment Other Mar 12 Earnings Earnings %% Retail FUM 23 (1) FUM based on a proportional ownership basis New Zealand Cash earnings and underlying profit (NZ$m) 24 24 494 496 532 569 385 329 269 283 Sep 10 Mar 11 Sep 11 Mar 12 National Australia Bank Net interest margin (%) 2.41 2.35 2.24 2.24 Sep 10 Mar 11 Sep 11 Mar 12 Cash earnings Underlying profit Sep 10 Mar 11 Sep 11 Mar 12 Revenue v expense growth B&DD charge (NZ$m) (NZ$m) 910 944 861 865 42.6% 42.7% 41.5% 39.7% 99 95 367 369 378 375 56 Sep 10 34 Mar 11 Sep 11 Mar 12 Revenue -Expenses %Cost to income ratio Sep 10 Mar 11 Sep 11 Mar 12 National Australia Bank#1325 26 Other international businesses UK Banking (£m) Great Western Bank (US$m) 3.0% 106 2.5% 47 3 50 57 77 43 2.0% 37 (25) 1.5% Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Cash earnings Net interest margin Cash earnings SGA-income and B&DDs 112 ($m) 85 80 70 54 (54) (299) (173) (95) (21) (20) (71) Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Income (ex SCDO risk mitigation MTM) B&DD SCDO portfolio update Removed 'sold protection' on two remaining SCDOS ▸ Removed $600m of credit risk ▸ $1.5bn RWA reduction ▸ $141m of hedge premium cost accelerated ▸ MTM 'noise' has been removed ▸ No economic risk remaining National Australia Bank (%) Strong Core Tier 1 (Basel II) capital position Business Capital Generation = 56bps Total Tier 1 0.83 (0.35) 0.16 (0.08) 0.06 (0.07) (0.10) 10.17% (9.19%) 9.70% 7.58 7.12 Mar 11 $24.6bn Sep 11 $25.8bn Cash Earnings $2.8bn Dividend (net of DRP) ($1.2bn) 8.03 Net RWA Reduction excl SCDO ($6.9bn) FCTR ($0.26bn) DTA $0.2bn Basel 2.5 ($2.9bn) Non-Cash earnings¹ ($0.34bn) Mar 12 $27.0bn (1) Non-cash earnings impact after adjusting for distributions, treasury shares, UK goodwill, software impairment, and separately disclosed items National Australia Bank#1427 28 Regulatory reform – status update Capital reforms Core Tier 1 8.03% Basel II act. *Includes the capital conservation buffer, to be implemented from 1 January 2016 9.28% Basel III est. (BIS Alignment) - 7.0% Basel III minimum* 7.58% Basel III est. under APRA proposed measures Key impacts to NAB from APRA's March 2012 draft capital standards: - Hybrids will be subject to transitional arrangements (including NIS) Investments into non-consolidated subsidiaries to be fully deducted Requirements for Basel III compliant hybrids ▸ Consultation will continue with APRA throughout 2012 ▸ Implementation phased from January 2013, earlier than Basel requires ▸ Well placed to manage capital impact, with strong core capital generation Funding and Liquidity reforms ▸ APRA proposed Basel III liquidity package delivered in November 2011 ▸ Clarification of various items and some positive developments ▸ Key items remain unresolved, particularly the size and composition of the RBA Committed Liquidity Facility ▸ Industry has reviewed proposed standards and given feedback ▸ Timing for release of final standards by APRA remains uncertain Note: Supervisory confirmation required Funding and liquidity Group Stable Funding Index (SFI) 84% 85% 85% 78% 72% 20% 20% 20% 19% 16% National Australia Bank Term funding - tenor of issuance 56% 59% 64% 65% 65% 4.7 4.8 4.1 4.2 Sep 08 Sep 09 Sep 10 Sep 11 Mar 12 Sep 10 Customer Funding Index Term Funding Index Mar 11 Sep 11 Mar 12 Weighted average maturity (years) of term funding issuance Term funding - volume of new issuance Liquid asset holdings ($bn) ($bn) 16.7 116 106 14.9 1.6 14.5 89 93 21 13.1 16 3.0 0.3 17 21 4.6 40 43 30 35 15.1 12.8 11.9 55 9.9 42 47 37 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 ■Senior and Sub Debt Sep 11 Mar 12 ■Government, Cash & Central Bank Bank, Corporate & Other Secured Funding Internal RMBS (contingent liquidity) National Australia Bank#15Remain focused on growing customer deposits Retail deposits less total lending (spot) Mar 12 vs Sep 11 ($bn) 3.6 2.9 1.1 0.7 (0.4) (1.6) 6.3 Total Personal Bank Customer Deposits BB UK PB & Private NZ Other WB ▸ Underlying deposit growth funded lending in 1H12 ▸ Emphasis on household and small business deposits ▸ Consistent with NAB's focus on balance sheet strength ▸ Over the six months ended March 2012, NAB grew deposit market share1: - Household deposits up 8.3% vs 5.4% system growth Business deposits (ex financial corps) up 1.0% vs 0.7% system growth Business Bank Customer Deposits ($bn) 3 year CAGR 17% 59 61 49 54 68 80 72 22 ($bn) 3 year CAGR 11% 78 69 73 77 78 -4 94 84 86 Mar 09 Sep 09 Mar10 Sep 10 Mar 11 Sep 11 Mar 12 Mar 09 Sep 09 Mar10 Sep 10 Mar 11 Sep 11 Mar 12 (1) APRA 29 30 National Australia Bank Summary ▸ Solid momentum in the Australia & NZ franchises ▸ Managing to positive jaws while continuing to invest ▸ Balance sheet strength a priority as we transition to new regulatory regime ▸ Strong focus on ROE at Group and Business Unit levels continues Outlook Subdued global economic activity likely ▸ Focus on growing deposits and managing margin ▸ Continue to drive efficiency to accommodate technology transition ▸ Execute on UK business model change National Australia Bank#16National Australia Bank Questions <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank#17Mar 11 Business Banking Business lending Customer deposits ($bn) ($bn) ($bn) 0.0% 0.8% 1.5% 10.0% 2.5% 3.6% 3.5% 1.7% 7.2% 132 129 129 130 78 84 86 94 55 Costs ($m) 33 nab Housing lending 44 57 59 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 871 879 885 875 Cash earnings on average assets 1.18% 1.25% 1.31% 1.29% 30.7% 29.9% 28.5% 28.7% Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 X% Cost to income ratio Business Banking Business lending volumes¹ ($bn) 0.6 0.1 (%) 1.4 0.4 (0.1) 0.7 129.1 Institutional & Corporate, Specialised Banking nabbusiness Working Capital Services 130.1 Sep 11 Enterprise cross-sell focus Total Customer Returns Corporate, Specialised Banking Institutional & nabbusiness - Capital Working Services Mar 12 Business lending market share² National Australia Bank 22.9 22.2 22.4 22.1 132.2 (%) 3.31% 3.40% 3.40% 3.60% 1.01% 1.03% 1.05% 2.30% 2.37% 2.35% Mar 11 Sep 11 Mar 12 Lending TCR Target State TCR Non-Lending TCR Figures have been adjusted to include additional products cross-sold not previously captured 34 nab (1) Updated to reflect transfers of customers between business units (2) RBA Financial System/NAB Sep 10 Mar 11 Sep 11 Mar 12 Net interest margin 2.66 2.57 2.56 2.50 Sep 10 Mar 11 Sep 11 Mar 12 National Australia Bank 60 60#18Business Banking: Net interest margin March 12 v September 11 2.66% 0.03% (0.07%) (0.06%) 0.01% (0.01%) Customer margin down 9bps 2.56% Sep 11 Lending Margin Deposits Funding & Liquidity Costs Liability Mix Other Mar 12 March 12 v March 11 0.08% (0.09%) (0.04%) 0.03% 0.01% 35 nab 2.57% Customer margin down 4bps 2.56% Mar 11 Lending Margin Deposits Funding & Liquidity Costs Liability Mix Other Mar 12 Business Banking Revenue ($m) 5.5% 3.6% (1.7%) 3,101 3,047 2,938 2,837 514 517 492 ΟΟΙ 485 Underlying profit National Australia Bank ($m) 7.6% (2.0%) 4.7% 2,216 2,172 1,966 2,059 2,352 2,446 2,587 2,530 NII Sep 10 Mar 11 Sep 11 Mar 12 B&DD charge ($m) 6.1% (8.3%) 10.8% Sep 10 Mar 11 Sep 11 Mar 12 Cash earnings ($m) 7.0% 0.0% 7.6% 1,098 1,181 1,264 1,264 410 385 417 372 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 36 nab National Australia Bank#19Business Banking: Total Diverse assets^ Housing 31% Business 69% Property & Business Services 41% Construction 4% Portfolio quality* PD Model Upgrades 68% 67% 72% 73% Other 18% Retail Trade 7% 32% Accommodation, Cafes, Pubs & Agriculture Forestry and Fishing 13% Restaurants 5% Sep 10 5% Wholesale Trade Manufacturing 7% 33% 28% 27% Mar 11 Sep 11 Mar 12 ■Investment grade equivalent ■Sub-Investment grade Well secured - business products B&DD charge ($m) 13% 14% 14% 14% 600 27% 25% 25% 25% 400 0.75% 0.60% 0.45% 60% 61% 61% 61% 200 0.30% 0.15% 0 0.00% Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Fully Secured** Partially Secured Unsecured B&DD charge B&DD/GLAS (annualised) (RHS) ^ Based on product split 37 nab Based upon expected loss ** Based upon security categories in internal ratings systems National Australia Bank Business Banking: SME Business* Diverse assets^ Personal 36% Property & Business Services Business 64% 46% Other 13% Finance & Insurance Construction 8% Portfolio quality** PD Model Upgrade 62% 59% 62% 66% Retail Trade 38% 41% 38% 34% 8% Accommodation, Cafes, Pubs Sep 10 Mar 11 Sep 11 Mar 12 & Restaurants 8% 5% Wholesale Trade 6% Manufacturing 6% ■Investment grade equivalent ■Sub-Investment grade Well secured - business products B&DD charge ($m) 6% 6% 6% 5% 300 0.60% 250 25% 24% 24% 23% 0.45% 200 150 0.30% 69% 70% 70% 72% 100 0.15% 50 0 0.00% Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 ■Fully Secured*** 38 nab IPartially Secured Unsecured Based on customer split SME business data reflects the nabbusiness segment of Business Banking which supports business customers with lending typically up to $25m, excluding the Specialised Businesses Based upon expected loss B&DD charge B&DD/GLAS (annualised) (RHS) National Australia Bank Based upon security categories in internal ratings systems#20National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank Personal Banking MFI customer satisfaction¹ (%) 74.1 -5.1% 69.0 Sweeney research brand tracker2 79.3 >0.8% 78.5 Peer NAB vs Average Peers Open and upfront 39% 36% ✓ 40% Transparent with 40% 37%✓ fees and charges 42% Customers are at 37% 34%✓ an advantage 38% A bank for people 41% 39% ✓ like me 41% A leader in making 40% 34%✓ Mar 12 NAB banking fairer 43% Sep 11 Mar 12 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 -Weighted average of three major bank peers Home loan multiple of system growth³ 40 40 (x) 1.1 Net transaction account growth (#) 152,121 154,499 143,700 3.4 3.3 123,173 2.7 2.2 79,911 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 (1) nab 23 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Roy Morgan Research, Aust MFIs, population aged 14+, six month moving average. Customer satisfaction is based on customers who answered very/fairly satisfied. NAB compared with the weighted average of the three major banks (ANZ, CBA, WBC) Sweeney Research Brand Tracker RBA Financial System/NAB National Australia Bank#2141 Personal Banking Cash earnings Revenue ($m) 15.7% ($m) (7.2%) 4.7% (0.9%) 1.4% 5.0% 500 426 432 464 1,747 1,731 1,589 1,669 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Costs Net interest margin ($m) (%) 891 900 902 866 2.28 2.22 2.17 54.5% 53.4% 51.5% 52.1% 2.02 Sep 10 nab Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 X% Cost to income ratio Personal Banking Housing loans ($bn) 6.4% 10.5% 8.7% Customer deposits National Australia Bank ($bn) 8.3% 5.9% 11.5% 133 125 115 78 68 72 104 61 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Housing loan market share¹ Household deposits market share² 14.5% 14.7% 14.5% 14.1% 14.2% 13.8% 13.6% 13.3% Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 42 nab (1) RBA Financial System, NAB (2) APRA Banking System, NAB National Australia Bank#22Personal Banking: Asset quality B&DD charge ($m) Cards & personal loans 90+ DPD (40.5%) 15.3% (22.5%) 1.16% 1.09% 163 138 169 116 0.98% 1.15% Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Mortgage 90+ DPD and impaired 0.67% 0.61% 0.56% 0.53% Total 90+ DPD and impaired ($m) 836 851 873 789 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 43 nab Personal Banking: Net interest margin March 12 v September 11 2.17% National Australia Bank 0.07% (0.06%) (0.11%) (0.02%) (0.04%) 0.01% Customer margin down 12bps 2.02% Sep 11 Lending Margin Deposits Funding & Liquidity Costs Liability Mix Lending Mix Other Mar 12 March 12 v March 11 44 nab 2.22% 0.08% (0.08%) (0.10%) (0.06%) (0.08%) 0.04% Customer margin down 16bps 2.02% Mar 11 Lending Margin Deposits Funding & Liquidity Costs Liability Mix Lending Mix Other Mar 12 National Australia Bank#23Change in profile of mortgage approvals LVR breakdown of final approvals (Australian Region) 100% Risk grade distribution of 90%+ LVR 100% 90% 80% 80% 70% 60% 60% 50% 40% 40% 30% 20% 20% 10% 0% 0% Dec 08 Mar Jun 09 09 Sep 09 Dec 09 Mar 10 Jun Sep 10 10 Dec 10 Mar 11 Jun 11 Sep Dec Mar 11 11 Dec 12 08 Mar 09 09 Jun Sep 09 Dec 09 Mar Jun Sep 10 10 10 Dec 10 Mar 11 Jun 11 11 Sep Dec Mar 11 12 LVR 60% or less LVR 80.01% to 90% LVR 60.01% to 70% LVR 70.01% to 80% LVR >90% LVR breakdown of Homeside final approvals Origination Period Very High High Medium Low Very Low Australian mortgages - cumulative 30+ DPD 4.5% 100% 80% 60% 4.0% 3.5% 3.0% 2.5% 40% 2.0% 1.5% 20% 1.0% 0% 0.5% Dec Mar Jun Sep 08 09 09 09 Dec Mar Jun Sep Dec 09 10 10 10 10 Mar Jun Sep Dec Mar 11 11 11 11 12 0.0% LVR 60% or less LVR 80.01% to 90% LVR 60.01% to 70% LVR 70.01% to 80% LVR >90% 0 3. 6 9 12 Months on books 15 18 21 24 ―2006 2007 2008 2009 2010 2011 2012 45 nab Excludes Advantedge mortgages portfolio National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook National Australia Bank nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank#2447 48 Wholesale Banking Customer sales performance Current Previous NAB Asset Servicing ranking ranking Best advice in Interest Rate Risk Management #1 (Corporate/Institutional: peer group ranking) #3 Assets under custody & administration Lead Interest Rate provider where the relevant bank is lead credit provider (Corporate /Institutional: peer group ranking) 2 #1 #=1 Largest Asset ($bn) Provider of Interest Rate Swaps #1 #1 (% primary relationship - Corporate) 3 Servicing Provider of Spot Foreign Exchange business¹ in #2 #2 (% primary relationship - Corporate) 3 Australia with 701 660 653 703 -30% market 561 599 600 Interest Rate Derivatives Market Share 6 #1 #4 share (by volume) Market Share in Cross Currency Interest Rate Swaps 6 #1 na Most Competitive Swap Quotes 6 #1 #5 #1 #3 Sep 07 Sep Sep 08 09 10 Sep Mar Sep 11 11 Mar 12 Most Valuable/Tailored Foreign Exchange advice to Financial Institutions (Australia Financial Institutions: peer group ranking) 7 Infrastructure and natural resources # 1 arranger of project finance to Australian Infrastructure Public Private Partnership (PPP) projects 8 #1 arranger of project finance to Australian Renewable Power projects 9 ABP ASSOCIATED BRITISH PORTS Associated British Ports £1.86bn 3,5 & 7 year Syndicated Facilities Debt capital solutions #1 ranked Bookrunner in AU Securitisation league table 4 #2 ranked in Australian Bookrunner Ranking for Syndicated Loans 5 Hydro Plenary Tasmania SANDFIRE RESOURCES NL Woolworths Health 調中国华能源投资有限公司 the fresh food people Victorian Comprehensive Sandfire Resources NL Woolnorth Wind Farms Cancer Centre Project $940m Construction & Term Loan Facility $380m Senior Project Facility $ 170m Term Facilities, Working Capital and L/C Provider Mandated Lead Arranger, Lender and Mandated Lead Mandated Lead Arranger Bond Bookrunner December 2011 Arranger, Swap Provider, Underwriter, Coordinating Bank & Original Acct Bank December 2011 January 2012 Sole MLA, Underwriter, Bookrunner, Facility Agent & Security Trustee Woolworths $1.2bn Syndicate Loan Facility SUNCORP Apollo Series 2011-1 $1.25bn Australian RMBS Issue Joint Lead Manager Joint Lead Manager 中國銀行 BANK OF CHINA Bank of China $600m Floating Rate Offering Joint Lead Manager SSE SSE PLC $700m USPP Joint Agent February 2012 October 2011 November 2011 March 2012 February 2012 (1) Australian Custodial Services Association, Total Assets Under Custody for Australian Investors, December 2011; (2) Peter Lee Associates Large Corporate & Institutional Relationship Banking Australia Survey 2011. Ranking against the four major domestic banks; (3) East & Partners Australian Corporate Banking Market Survey, January 2012; (4) Kanganews, Dec 27th 2011 AU Securitisation League Table, AUD tranches only-excl. Self-Led deals; (5) Dealogic Loans Review - Full Year 2011; (6) Peter Lee Associates Interest Rate Derivatives Australia Survey 2011; (7) Peter Lee Associates - Foreign Exchange Australia Survey 2011, Financial Institutions. Ranking against the four major domestic banks; (8) Project Finance International 2009-2011 APAC MLA League Tables US$ Project Allocation, NAB analysis ranking against four major domestic banks - cumulative volume; (9) NAB analysis ranking against four major domestic banks - cumulative volume. Data Source: Project Finance International 2006-2011 APAC MLA League Tables US$ Project Allocation Wholesale Banking Cash earnings and underlying profit ($m) Revenue by line of business ($m) National Australia Bank 1,219 997 895 859 495 426 754 375 174 541 518 428 393 400 302 268 685 724 520 571 Sep 10 Mar 11 Cash Earnings Sep 11 Underlying Profit Mar 12 B&DD charge ($m) 16 47 33 Sep 10 (12) Mar 11 Sep 11 Mar 12 (1) Fixed Income, Currencies & Commodities Sep 10 Mar 11 ■Customer Sep 11 Risk Mar 12 • Customer comprises Sales, Asset Servicing, Specialised Finance and Financial Institutions Group ⚫ Risk comprises FICC1 and Treasury ▸ Customer income up on the September 11 half reflecting continued cross-sell momentum in Corporate & Business Sales Risk income (FICC1 and Treasury) significantly improved during the half resulting from an improved trading environment with higher customer flows B&DD charge driven by two provisions raised, asset quality remains sound National Australia Bank#2549 50 Wholesale Banking: Income Customer income ($m) 724 685 631 629 570 571 520 308 296 464 224 274 232 298 263 196 416 407 338 355 389 273 268 257 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Sales Other Risk income Mar 12 20 ▸ Customer income compound annual growth rate from September 2008 to March 2012 is 13.6%, driven by continued success in the franchise focus strategy, investing in capabilities to provide innovative risk management solutions to the Group's customers Risk income (FICC and Treasury) has significantly improved on the September 2011 half as a result of good client flows and increased trading opportunities through improved market conditions ($m) 905 738 15 429 495 420 404 426 10 362 375 200 92 148 158 169 174 476 5 270 318 256 268 206 107 295 67 0 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Treasury FICC VaR (traded) (RHS) National Australia Bank Wholesale Banking: Asset quality Gross impaired assets ratio ($m) 400 300 3.0% 2.5% 2.0% 200 1.5% 1.0% 100 0.5% 0 0.0% Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Gross impaired assets Gross impaired assets as % of GLAS ▸ Portfolio asset quality is stable with over 90% at investment grade equivalent ▸ Gross impaired assets were broadly stable on the September 2011 and March 2011 half year Collective provisions ($m) 233 222 209 212 159 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 National Australia Bank#26National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank NAB Wealth Investments cash earnings 62 52 ($m) 162 Mar 11 6 4 (6) (6) 2 Private Wealth MtM annuities volumes & invest. profits margins Insurance cash earnings ($m) 108 Expenses Loss on nablnvest seed funds 162 14 1 (8) (4) 2 167 Lower B&DDS Sep 11 Annuity Experience (incl MtM invest. Profits) FUM/ volumes Underlying Margins (Business Mix Private Wealth volumes & margins Other Mar 12 & Pricing) 7 (21) 2 (12) (8) (4) 72 Mar 11 PIF Earnings on the Assets backing the Insurance Portfolio nab MLC 7 6 4 93 Policyholder Mix Claims Allocated Financial Planning Other Sep 11 PIF Claims Policyholder Mix & Lapses Allocated Mar 12 Financial Planning revenue revenue National Australia Bank#27NAB Wealth Movement in FUM1 ($bn) 73% 0.1 72% 7.0 67% (8.4) 7.7 (0.4) (1.5) 119.0 Mar 11 Net flows Investment Other % Earnings % Retail FUM Premiums inforce ($m) 2.1% 110.3 Movement in investments margin 0.86% 0.04% (0.03%) 0.02% (0.02%) (0.01%) (0.01%) (0.00%) 0.85% Annuity Experience Sep 11 Plum new client costs FUM Mix 123.5 Mar 11 nabinvest investment earnings on seed funds Annuity investment profits Sep 11 Net flows Investment Eamings Other Mar 12 2.1% 1.8% 1,407 1,436 1,466 1,493 Sep 10 Mar 11 Sep 11 Mar 12 0.85% O Mar 12 Other Business Mix & Pricing Changes 53 nab MLC (1) FUM based on a proportional ownership basis National Australia Bank NAB Wealth Movements in operating expenses ($m) 561 8 (14) 12 567 Mar 11 Integration Benefits Growth in Advisors & Support Staff Seasonality Sep 11 Movements in FTEs (#) 5,714 5,924 5,909 5,635 758 719 829 440 534 385 774 351 4,555 4,632 4,695 4,510 Sep 10 BAU FTES 54 nab MLC Mar 11 Sep 11 Mar 12 Project FTES Salaried adviser FTEs 13 13 10 10 (6) (13) New Products nablnvest Integration Seasonality & & Services Acquisitions Benefits Other 571 Mar 12 National Australia Bank#28Channel and adviser growth Investment sales by channel Insurance sales by channel 44% 41% 36% 34% 46% 41% 39% 35% 30% 32% 29% 30% 15% 19% 20% 22% 27% 29% 34% 34% 39% 40% 41% 43% Sep 10* Mar 11 Sep 11 Mar 12 Sep 10* Mar 11 Sep 11 Mar 12 Bank Aligned IFA Bank Aligned IFA * IFA sales were re-stated in 2010 to include Aviva Wealth adviser movement analysis (#) 1,555 312 (175) 173 (195) 178 (119) 113 1,864 1,842 1,727 Exits Recruits Sep 10 Mar 11 Meritum Exits Recruits 55 nab MLC Sep 11 Exits Recruits Mar 12 National Australia Bank * IFA sales were re-stated in 2010 to include Aviva Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook National Australia Bank nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank#2957 New Zealand Banking Cash earnings (NZ$m) 17.0% 16.3% 5.2% 385 329 269 283 Net interest margin (%) 2.41 2.35 2.24 2.24 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Revenue v expense growth B&DD charge (NZ$m) (NZ$m) 910 944 861 865 42.6% 42.7% 41.5% 39.7% 99 95 367 369 378 375 56 Sep 10 Mar 11 Sep 11 34 Mar 12 Revenue - Expenses %Cost to income ratio Bank of New Zealand New Zealand Banking Business lending (NZ$bn) 0.4% 1.1% 2.6% Sep 10 Mar 11 Sep 11 Mar 12 Retail lending National Australia Bank (NZ$bn) 1.5% 2.2% 2.1% 28.5 27.5 27.9 29.1 1.5 1.5 1.5 1.5 26.9 27.0 27.3 28.0 26.0 26.4 27.0 27.6 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Housing Unsecured Personal Retail deposits Costs (NZ$bn) (NZ$m) 367 369 378 375 5.6% 4.6% 5.3% 31.8 33.5 28.8 30.4 14.2 15.2 16.3 17.6 42.6% 42.7% 41.5% 39.7% 14.6 15.2 15.5 15.9 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 BNZ Partners BNZ Retail X% 58 Bank of New Zealand Mar 11 Sep 11 Mar 12 Cost to income ratio National Australia Bank#30New Zealand Banking: Net interest margin March 12 v September 11 2.35% 0.02% (0.05%) 0.02% 0.01% 0.04% 0.02% Customer margin up 3bps 2.41% Sep 11 Lending Margin Deposits Funding & Liquidity Liability Mix Lending Mix Other Mar 12 Costs March 12 v March 11 2.24% 0.08% (0.06%) 0.03% Customer margin up 5bps 0.05% 0.07% Mar 11 Lending Margin Funding & Liquidity Costs Liability Mix Lending Mix Other 59 Bank of New Zealand 2.41% Mar 12 National Australia Bank New Zealand Banking: Asset quality Total 90+ DPD as % GLAS 0.6% 0.5% (NZ$m) 300 250 200 0.4% 150 0.3% 100 0.2% 50 0.1% 0 0.0% Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 90+ DPD Total 90+ DPD as % GLAS ▸ The combined total of Gross impaired assets and 90+ DPD has decreased from the prior half primarily due to business exposures ▸ Exposures in the commercial property, dairy farming and kiwifruit sectors are the main industry concerns ➤ Net write-offs are slightly higher compared to the September 2011 half year due to higher partial write-offs against existing provisions, offsetting lower unsecured write-offs Gross impaired assets as % GLAS Net write-offs (NZ$m) (%) 800 1.5% 1.2% 600 0.9% 0.27 0.24 0.25 400 0.22 0.6% 0.18 200 0.12 0.13 0.3% 0 0.0% Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 I Gross impaired assets (including FV) GIA (including FV) as % of GLAS 60 Bank of New Zealand Net write-offs to GLAS (annualised) National Australia Bank#3162 National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank UK Banking Business lending (£bn) (1.1%) 0.0% Personal lending (£bn) 0.0% 0.7% 4.1% 3.3% 18.1 17.9 17.9 17.9 15.3 15.8 14.6 14.7 6.8 6.5 6.3 6.1 2.0 1.8 1.7 1.5 Retail deposits (£bn) (1.3%) (0.4%) 3.9% 23.7 23.4 23.3 24.2 11.3 11.4 11.6 11.8 12.6 12.9 13.6 14.3 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Other business ■Commercial property ■Housing Unsecured Net interest margin Costs (£m) (%) 359 363 363 348 59.2% 59.0% 56.4% 58.8% 2.28 2.33 2.33 2.09 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 X% Cost to Income Ratio Ca Clydesdale Bank Yorkshire Bank National Australia Bank#32UK Banking: Net interest margin March 12 v September 11 0.07% (0.11%) (0.09%) (0.04%) (0.05%) 2.33% (0.01%) (0.01%) Customer margin down 17bps 2.09% Sep 11 Lending Margin Deposits Funding & Liquidity Costs Liability Mix Lending Mix Liquids (volumes) Other Mar 12 March 12 v March 11 2.33% 0.21% (0.14%) (0.21%) Mar 11 Lending Margin Customer margin down 17bps Deposits 63 Ce Clydesdale Bank Yorkshire Bank Funding mix Stable funding index (0.03%) (0.07%) 2.09% Funding & Liquidity Costs Liability Mix Lending Mix Mar 12 National Australia Bank 105.3% 20.1% 93.8% 11.9% 96.7% 97.1% 11.8% 9.9% 75% 73% 70% 71% 85.2% 81.9% 84.9% 87.2% Sep 10 Stable funding index (SFI) based on spot balances CFI Mar 11 Sep 11 TFI Retail cover ratio Mar 12 64 Ca Clydesdale Bank Yorkshire Bank National Australia Bank#33UK Banking: Other operating income and expenses March 12 v March 11 Other operating income March 12 v September 11 Other operating income (£m) 134 (£m) 14 (4) (2) 142 153 8 (14) (5) 142 Mar 11 PPI Refunds in prior period Fees and commissions Other Mar 12 Sep 11 Profit Share Fees and commissions Other Mar 12 Operating expenses (£m) 358 359 363 363 359 353 348 344 325 Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 65 Ce Clydesdale Bank Yorkshire Bank National Australia Bank UK Banking portfolio composition March 2012 Total portfolio composition £33.5 bn Business 52% Gross Loans & Acceptances £33.5bn 100% Mortgages 44% Business Lending £17.5bn 52% Mortgages £14.6bn 44% Unsecured £1.4bn 4% Commercial Property Unsecured 4% £6.0bn 34% Non Property £11.5bn 66% Residential £11.7bn 80% IHL £2.9bn 20% PL Cards Other £0.7bn £0.5bn £0.2bn 47% 33% 20% Pro forma portfolio composition (post CRE transfer to NAB) Mortgages 53% Business 42% £27.3 bn Unsecured 5% Investment £5.1bn 85% Development £ 0.9bn 15% 66 Ca Clydesdale Bank Yorkshire Bank National Australia Bank#34UK Banking: Asset quality Total 90+ DPD as a % of GLAS (£m) 350 300 250 200 150 100 50 0 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 90+ DPD (£m) 90+ DPD as % of GLAS 90+ DPD as a % of GLAS by product (%) 0.6 0.4 0.2 0.0 Mortgages קן Business Loans Personal Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 67 Ce Clydesdale Bank Yorkshire Bank Coverage ratio (%) 1.2% 2.5 1.0% 2.0 0.8% 1.5 0.6% 1.0 0.4% 0.2% 0.5 0.0 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Coverage ratio (Total Provisions to GLAS) B&DD charge (£m) 253 183 164 151 145 282 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 National Australia Bank UK Banking: Asset quality 90+ DPD and GIAs as a % of GLAS Gross impaired assets (£m) (%) 3.44 3.68 1,000 3.0% 3.15 2.98 3.12 0.79 800 2.5% 2.60 0.80 0.81 0.57 2.0% 0.89 600 0.85 1.5% 400 1.0% 2.64 2.09 2.34 2.55 2.89 200 1.75 0.5% 0 0.0% Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Gross impaired assets Gross impaired assets as % of GLAS GIA as % of GLAS 90+ DPD as % of GLAS UK CRE credit quality¹ (%) UK Credit quality excluding CRE 8.67 9.16 9.55 10.0 12.37 1.91 (%) 1.99 1.80 1.64 0.88 1.42 1.43 0.65 1.55 6.92 1.52 1.47 1.28 0.55 1.14 0.64 0.50 4.66 1.34 0.72 10.46 0.70 0.88 9.12 0.66 7.15 7.69 8.13 5.58 3.78 1.34 1.25 1.00 1.05 0.71 0.48 0.58 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 CRE 90+ DPD as % of CRE GLAS CRE GIA as % of CRE GLAS (1) Reflects credit quality of total CRE portfolio 68 Ca Clydesdale Bank Yorkshire Bank Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 90+ DPD (ex CRE) as % of GLAS (ex CRE) ■GIA (ex CRE) as % of GLAS (ex CRE) Mar 12 National Australia Bank#35UK Banking CRE provisioning increased UK CRE impaired loan coverage Total UK CRE provision coverage - Mar 12 4.4% 23% 48% 2.5% 11.9% 14% 2.4% 7.5% 25% 11% 2.6% Spec Prov coverage Sep 11 1H12 provisioning Spec Prov coverage Mar 12 Partial write-offs Implied CRE impaired coverage Specific Collective Provision Prov UK CRE overlay Total prov Partial write-offs Implied CRE Coverage Note: CRE specific provision over CRE impaired assets Provision coverage of NPL assets¹ Commercial real estate 61% Total commercial lending Provision coverage of CRE assets 1 7.5% 43% 36% 37% 30% NAB UK Banking CRE² RBS UK Property Lloyds CREI BSU Lloyds Commercial Barclays Note: Total provision over impaired and 90DPD loans (1) Source of peer comparison is 2011 audited financial statements 69 (2) Includes UK CRE overlay of £150m - excluding overlay coverage is 41% National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook NAB UK Banking CRE Note: Total provision over total loans 5.1% RBS UK Property National Australia Bank nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank#3671 Great Western Bank Cash earnings (US$m) Gross loans & acceptances (US$bn) LLLL 50 47 43 37 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 ■GLAS (ex acq workout) Acquired workout loans Loan portfolio composition (US$bn) B&DDs and asset quality metrics (US$m) 25% 3.5% 20% 3.0% 15% 2.5% 4.6 4.3 4.1 4.2 2.0% 10% 1.5% 31 32 27 1.0% 5% 14 0.5% 0.8 0.9 1.1 1.2 0.0% 0% Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Mar 12 Agri Other -Agri as % of total B&DDs 90DPD + GIAs to GLAS (ex covered loans) Great Western Bank National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook National Australia Bank nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank#3773 74 Specialised Group Assets Cash earnings & underlying profit Portfolio income¹ ($m) ($m) 115 (84) (108) 18 139 28 80 87 77 69 33 8 (319) (127) (217) (135) (45) (6) 3 (3) 59 17 127 4 125 100 80 104 7 63 (30) (67) (4) (84) (80) (162) (14) (1) (101) (65) (6) Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 SCDO Risk Mitigation MTM ■Cash Earnings Underlying Profit Non Franchise Asset Income (1) Sept 11 income includes recovery for equity workout Markets Counterparty Credit Val Adj CDS Hedging MTM volatility B&DD charge ($m) 299 173 95 71 21 20 RWAS ($bn) 25.3 24.3 20.5 18.0 15.0 8.0 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 National Australia Bank Specialised Group Assets: Asset quality 90+ DPD and GIAs as % of GLAS Gross loans & acceptances (average) ($bn) ($m) 800 600 400 200 0 MII. Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 90+ DPD and GIAS (LHS) 90+ DPD and GIAS as % of GLAS (RHS) 12.0% 12 10.0% 10 8.0% 8 6.0% 6 4.0% 2.0% 4 0.0% 2 0 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Specific provisions to gross impaired assets ($m) 200 150 100 50 Collective provisions¹ as a % of credit RWAs ($m) 40% 600 30% 500 400 20% 300 200 10% 100 0% 0 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Specific provisions (LHS) Specific provisions to gross impaired assets (RHS) Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Collective provisions (LHS) Collective provisions as a % of credit RWAS (RHS) (1) Prior periods include $160m overlay. Fully utilised at March 2012. 3.0% 2.0% 1.0% 0.0% National Australia Bank#3875 76 Specialised Group Assets - SCDO update In 1H12, removed the 'sold protection' on the last two remaining SCDOS What we have done ▸ Exited the 'sold protection' of the last two remaining SCDOS ▸ Terminated one original CLN note and novated the corresponding hedge (at no cost to NAB) Impact ▸ Removed $600m of credit risk ▸ $1.5bn RWA reduction ► $141m of hedge premium cost accelerated ▸ MTM 'noise' has been removed Regarding the remaining SCDOS ▸ Two fully hedged positions remain with one credit event during the first half ▸ As at 31 March, there is no longer any unhedged SCDO risk ▸ During the current half the final SCDO MTM was a positive $17 million ▸ The recognition of remaining hedge costs related to the SCDO risk mitigation trades have been accelerated by expensing the carrying value of these hedge costs to non-cash earnings ▸ During the March 2012 half year, $141 million ($99 million after tax) of such costs were expensed through non-cash earnings ▸ The $160 million provision overlay for conduits and derivatives has been used to absorb the residual costs SGA Conduit Portfolio Summary1 Movements between September 2011 and March 2012 Sep 2011 Asset Backed CDO A$0.2bn (A$1.6bn) National Australia Bank Mar 2012 Corporates (SCDOs) A$1.3bn Credit Wrapped ABS A$0.6bn Decrease due to repayments, maturities and terminations (A$0.1bn) Decrease in exposure due to foreign currency exchange rate movements Corporates (SCDOS) A0.5bn Credit Wrapped ABS A$0.5bn CMBS A$0.6bn Infrastructure Bonds A$0.2bn Credit Wrapped Bonds A$0.5bn Leveraged Loans A$1.4bn Subscription loans A$0.4bn Mortgages A$0.2bn A$5.4bn CMBS A$0.5bn Infrastructure Bonds A$0.2bn Credit Wrapped Bonds A$0.5bn Leveraged Loans A$1.3bn Mortgages A$0.2bn A$3.7bn² (1) Includes Group's exposures (drawn and available to be drawn) initially funded by NAB sponsored and third party sponsored asset backed commercial paper conduits and SPE purchased assets (2) Specialised Group Assets has removed the economic risk associated with the six sold protection SCDO derivative exposures National Australia Bank#3977 78 Structured Asset Management Credit Wrapped ABS - $0.5bn Current NAB Exposure Average Portfolio Rating (excludes Portfolio Policy, includes Bond Level Policies) Portfolio Guarantor % of Underlying Asset with Wrap Asset Breakdown Residential Mortgage Backed Security* Commercial Mortgage Backed Security Insurance Student Loan Collateralised Debt Obligation Transportation & Other ABS Portfolio 1 $305m (US$318m) B3/B MBIA (B3/B) 43.4% Portfolio 2 $209m (US$217m) Caa1/ CCC+ AMBAC (NR/NR) - Policy terminated Oct 2011 30.7% 34.1% 47.8% 0.0% 5.2% 15.6% 3.5% 7.1% 32.1% 27.4% 0.0% 15.9% 11.4% * Note that this includes Subprime, Prime, Alternative A, 2nd Lien and HELOC RMBS ▸ NAB owns a pro-rata share of two RMBS/ABS portfolios with concentrations to US residential mortgage-backed securities ▸ At issue, all bonds in the portfolios were rated AAA/Aaa by S&P and Moody's either directly or as the result of an insurance policy ▸ In addition to the bond-level policies covering a portion of each portfolio, there is a portfolio-wide policy from MBIA on Portfolio 1 that serves as insurance against loss. The AMBAC portfolio-wide policy was terminated by mutual agreement in October 2011 ▸ The provision held against the portfolios has not materially changed ▸ Following a change in treatment, the RWA for the Credit Wrapped ABS has been reduced by $3.2bn, with a corresponding increase in capital deductions of $229m Portfolio Composition as at 31 March 2012 Total Total Provisions Commitments (specific & (A$bn) collective) Average Contractual RWAS Number Tenor (A$bn) of Clients (years) Close Review Commitments (A$bn) (A$m) Leveraged Finance UK 0.8 94 2.9 1.5 28 0.2 Corporate UK¹ 1.5 116 1.6 2.3 33 33 0.9 Structured Asset 1.3 15 Finance UK 15 14.7 0.9 110 Private Portfolio 0.6 7 8.5 0.6 USA 90 16 0.0 Structured Asset Management 47% 23 0.0 Total Loans 4.2 232 n/a 5.3 100 1.1 & Advances 117 Structured Asset Management² 3.7 91 = Total (1) Of which: Property UK (2) Hold To Maturity Assets 11.0 2.7 7.9 323 8.8 8.0 00 0.4 68 808 27 22 0.5 55 127 1.6 0.8 0.9 15 0.3 National Australia Bank Private Portfolio USA 8% Leveraged Finance UK 10% Corporate UK 19% Structured Asset Finance UK 16% National Australia Bank#4080 79 Portfolio Composition - Credit profile ▸ 58% of commitments relate to Investment Grade equivalent clients or transactions Non- Investment (A$m) Investment Grade AAA/BBB- Non- Investment Non- Investment Default or restructure Grade BB+/BB Grade BB-/B+ Grade B+/CCC- D Leveraged Finance UK 0 181 325 198 103 Corporate UK 277 270 428 298 212 Structured Asset Finance UK 1,036 229 0 0 40 Private Lending USA 464 24 92 12 14 Total Loans & Advances 1,777 704 845 508 369 Structured Asset Management¹ 2,797 97 0 545 307 Total Commitments Total RWAS Total Provisions 4,574 801 845 1,053 676 3,000 1,210 1,694 1,602 503 1 6 50 42 224 Number of Accounts 49 19 29 23 19 Number of Close Review Accounts 0 0 6 15 19 (1) Hold to Maturity Assets All data as at 31 March 2012 Investment grades equivalent of external ratings National Australia Bank Portfolio Composition Contractual Maturity Profile - Commitments ▸ Actual commitments have decreased from September 2009 largely through repayments and decreased commitments as well as the weakening of both USD and GBP against the AUD ▸ The contractual maturity profile differs to the estimated maturity profile due to potential refinancing risks for a number of clients. The weighted average contracted maturity of the portfolio is 8.8 years 22.00 SGA committed lending 5 year maturity profile A$bn 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 Sep-09 Total Commitments would be A$6.0bn by Sep 2014 on a contractual basis, assuming constant FX rates Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 -Actual -Contractual Maturity -Estimated Maturity National Australia Bank#41SGA Portfolio Composition Commitments by Geography of Risk UK & Europe North America Australia & New Zealand Other Total Commitments ($bn) RWAS ($bn) 4.7 5.5 2.2 1.6 0.7 0.7 UK & Europe 59% 0.3 0.2 7.9 8.0 Commitments by Sector of Risk Commitments Other 4% North America 28% Australia & New Zealand 9% Commitments ($bn) RWAS ($bn) Collective Specific Provisions Provisions1 ($m) ($m) Other NBFI 4% Insurance 8% NBFI 4% L 0.6 0.4 0.3 23.0 Insurance 0.3 0.6 Industrial 0.3 0.6 Infrastructure 0.5 0.3 Retail 0.2 0.4 6634 6.9 Industrial 4% 48.2 Infrastructure 3.3 0.7 6% 14.0 Retail 2% Utilities 0.6 0.5 0.3 - Resources 0.8 0.5 5.4 Utilities Transport 8% 0.7 0.8 17.4 12.3 Property 0.4 1.0 11.9 58.5 TMT 0.2 0.4 12.5 9.6 Resources 10% ABS & CDOs 3.0 2.0 3.0 87.5 Other 0.3 0.5 3.4 4.5 Total 7.9 8.0 126.6 196.1 TMT 2% Transport 9% Property 5% 81 (1) Provisions for ABS & CDOs is on Hold to Maturity assets. All other specific provisions are on loans and advances 82 BS & CDOS 38% National Australia Bank Structured Asset Management Description: CDOs, residential mortgage backed securities ('RMBS'), commercial mortgage backed securities ('CMBS') and other asset backed securities. No. of Transactions 27 Commitments Drawn Balance $3.7bn $3.7bn Credit RWA $2.7bn No. of Close Review Clients 2 Close Review Commitments $514m Avg contractual maturity 11.0 yrs *weighted average by commitment Sector Analysis Commitments ($bn) Collective Provisioning¹ ($m) Specific Provisioning² ($m) SCDO 0.5 CLO 1.3 Other 0.1 CMBS 0.5 RMBS 0.4 CMBS/CRE CDO 0.1 Student Loan ABS 0.1 Utilities³ 0.7 Total 3.7 3.31 (1) Collective provision is applied to the entire portfolio and is not assigned to individual sectors (2) Provisions on this portfolio are booked against hold to maturity assets (3) Previously disclosed separately as Credit Wrapped Bonds CRE/CMBS CDO 3% RMBS 11% Student Loan ABS 3% Utilities 16% Other 4% Utilities 16% 87.52 SCDO 14% CLO 35% National Australia Bank#4284 National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank NAB's operational focus in Asia Beijing NAB and MLC representative offices Shanghai branch (Corporate and Business focus) Fuzhou/Shanghai 16.8% stake in China Industrial Trust Tokyo & Osaka branches > Institutional, Trade, Deposit Offers Geographic Focus ▸ Trading partners of Japan, China, India and Indonesia Liquidity hubs of Singapore and Hong Kong Linking the flows of these markets with Australia and New Zealand Hong Kong 2 branches, Markets, Institutional, > Trade, Business Banking, Healthcare, Personal Banking & Deposit Offers, Calibre Asset Management (financial planning) Customer Focus ▸ Corporates and institutions in key industries ▸ Australian corporates linked to Asia, and Asian corporates with interests in Australia ▸ Wealthy individuals and families with links between NAB's home markets and Asia ▸ Local cash rich deposit customers Mumbai branch (Corporate and Business focus) Singapore branch > Institutional, Trade, Business Banking, Healthcare, Personal Banking & Deposit Offers Indonesia representative office > Supporting offshore trade, wholesale banking and personal banking Product Focus ▸ Corporate finance and trade finance ▸ FX products, interest rate and commodity risk management ▸ Multi-currency mortgages ▸ Institutional and retail deposits Representative office(s) Branch(es) National Australia Bank#4386 National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank Group portfolio Gross loans and acceptances by product and by business unit as at March 2012 Term Lending 30% Acceptances 8% Overdrafts 3% Leasing 3% Credit Cards 2% Housing Loans Other 1% 53% SGA Personal NZ Banking 1% 9% - Banking 30% Risk rated non-retail exposures¹ 27% 26% 23% 24% Other 36% 35% 37% 41% UK Banking 11% BBB+ to BBB- 73% 74% 77% 76% Wholesale Banking 3% A+ to A- Investment 19% Grade Equivalent Investment 18% Grade Equivalent Investment 18% Grade 18% Equivalent Investment Grade Equivalent AAA to AA- 18% 21% 22% 17% Business Banking 41% GWB 1% NAB Wealth, Other 4% Sep 10 Mar 11 Sep 11 Mar 12 90+ DPD & impaired assets as a % of gross loans and acceptances by product 2.0% 1.5% 1.0% 0.5% 0.0% Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 ■Mortgages Impaired Business Impaired Mortgages 90+ DPD Business 90+ DPD Retail Unsecured 90+ DPD 90+DPD Impaired (1) Expected loss is the product of Probability of Default x Exposure at Default x Loss Given Default. The calculation excludes defaulted assets National Australia Bank#4488 87 Group gross loans and acceptances Group asset composition - growth by product segment ($bn) Non Retail Retail portfolio - outstandings volume ($bn) Retail - secured Retail - unsecured -15 -10 -5 0 5 10 15 20 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Industry balances ($bn) Government and public authorities | Real estate construction Manufacturing Personal lending Asset and lease financing Financial, investment and insurance Agriculture, forestry, fishing & mining Other commercial and industrial Commercial property services Real estate - mortgage Sep Dec ●៖ ៖ ៖ ៖ ៖ ៖ Sep 09 2 2 8 Dec 09 Mar 10 10 10 1 10 unc Sep 10 Sep 11 Dec 11 Mar 12 Group Retail Outstandings -12 Month Rolling Growth Rate Gross loans and acceptances by geography Mar 11 Asia 0.9% Mar 12 United States 1.2% New Zealand 9.3% 0 40 80 120 160 200 240 280 Note: These charts use spot exchange rates. Change in exchange rates relative to the Australian dollar since 2008 has partly affected growth rates Europe 11.9% Australia 76.7% National Australia Bank Group portfolio – change over three year period - March 2012 - Gross loans and acceptances by product March 2012 - Gross loans and acceptances by geography Housing Loans 53% Term Lending 30% Acceptances 8% Overdrafts 3% Leasing 3% Credit Cards 2% Other 1% Asia 0.9% United States 1.2% New Zealand 9.3% Europe 11.9% Australia 76.7% March 2009 - Gross loans and acceptances by product March 2009 - Gross loans and acceptances by geography Housing Loans 45% Term Lending 30% Acceptances 13% Overdrafts 4% Leasing 4% Credit Cards 2% -Other 2% Asia 0.7% United States 1.9% New Zealand 10.2% Europe 18.7% Australia 68.5% National Australia Bank 14% 12% 10% 8% 6% 4% 2% 0% -2%#4589 90 Group provision balances and coverage ratios Collective provision balances Specific provision balances ($m) ($m) 3,570 1,524 1,546 1,634 3,488 1,419 3,398 118 162 179 428 172 180 155 3,058 142 1,337 1,092 1,204 954 Sep 10 Mar 11 Sep 11 Mar 12 Sep 10 Mar 11 Sep 11 Business <$25m Retail Coverage ratios 2.0% 1.5% 1.0% 0.5% 0.0% Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 GRCL top up (pre-tax) as a % of Credit Risk Weighted Assets (ex Housing) Collective Provisions as a % of Credit Risk Weighted Assets (ex Housing) Total Provisions as a % of Gross Loans and Acceptances Group provision movements Collective provision ($m) 3,398 12 (159) (150) 10 (43) Mar 12 Single Names >$25m National Australia Bank 3,058 Sep 11 Retail Non Retail (including loans at fair value) SCDO overlay utilisation Derivatives at fair FX Impact/Other value Mar 12 Specific provision ($m) 492 (10) (2) 101 (493) 24.2% # 26.8% # 1,546 1,634 Sep 11 Non-Retail Large Mortgages* (>$10m) Retail Other* Non Retail Other* Net W/Offs Large (>$10m) Mar 12 # Specific provision as a % of impaired assets Net of write-offs National Australia Bank#46Business Banking, Personal Banking and NAB Wealth Portfolio breakdown - total $362.8bn Overdraft 2% Other 1% Credit Cards 2% Personal Loans 1% Bills 11%- Term Loans - Business 24% Australian Mortgages Owner Occupied Investment Low Document Proprietary Mar 12 Sep 11 Mar 11 70.8% 70.2% 68.6% 29.2% 29.8% 31.4% 2.4% 2.4% 2.0% 68.0% 69.0% 70.6% Mortgages 59% Third Party Introducer 32.0% 31.0% 29.4% LMI Insured % of Total HL Portfolio 14.7% 14.4% 14.7% Current Loan to Value Ratio (CLVR)1 55.8% 52.4% 50.2% Customers ahead 3 repayments or more¹ 45.4% 45.7% 46.0% Average loan size $ ('000) $258.4 $254.9 $247.5 90+ days past due 0.55% 0.48% 0.54% Impaired loans 0.27% 0.29% 0.28% Specific provision coverage 20.2% 19.6% 18.2% Loss rate 0.06% 0.06% 0.06% 91 (1) Ratio excludes Advantedge mortgages portfolio Australian Mortgages¹ - $213bn Geography Vic 30% Qld 20% SA 5% NSW 34% WA 11% Customer segment Investor 29% First home buyer 9% 92 (1) Excludes Wholesale Banking National Australia Bank Low doc loans ▸ $5.1bn outstanding (2.4% of housing book) ▸ LVR capped at 60% (without LMI) Origination source Mar 12 Sep 11 Mar 11 Sep 10 - flows (Australia) Proprietary 64% 61% 60% 61% Broker 29% 31% 32% 31% Owner occupied 62% Introducer 7% 8% 8% 8% National Australia Bank#4793 94 UK Banking Portfolio breakdown - total £33.5bn UK Mortgages Mar 12 Sep 11 Mar 11 Owner Occupied 79.7% 79.6% 79.6% Investment 20.3% 20.4% 20.4% Low Document 0.0% 0.0% 0.0% Mortgages Commercial Property 18% 44% Proprietary 72.0% 72.8% 75.1% Third Party Introducer 28.0% 27.2% 24.9% LMI Insured % of Total HL Portfolio 1.3% 1.4% 1.5% Loan to Value (at Origination) 62.7% 64.0% 62.5% Loan to Value Indexed 53.5% 53.4% 53.5% Other Unsecured Business 34% 4% Average loan size £ ('000) 97 46 94 90 90+ days past due 0.57% 0.62% 0.76% Impaired loans 0.43% 0.44% 0.38% Specific provision coverage 21.4% 30.1% 22.8% Loss rate 0.11% 0.06% 0.05% NZ Banking Portfolio breakdown - total NZ$58.1bn National Australia Bank New Zealand Mortgages Mar 12 Sep 11 Mar 11 Low Document Loans 0.26% 0.24% 0.22% Commercial Property 12% Proprietary (Distributed by Bank) 100% 100% 100% Mortgages 48% Third Party Introducer 0.0% 0.0% 0.0% Agriculture, Forestry and- Fishing 18% Insured % of Total HL Portfolio¹ 11.4% 10.7% 10.0% Loan to Value (at origination) 63.5% 63.0% 61.7% Retail and Average loan size NZ$ ('000) 252 248 242 Wholesale Trade 4% Manufacturing 4% Other Commercial 11% Personal Lending 3% 90+ days past due 0.31% 0.29% 0.35% Impaired loans 0.46% 0.51% 0.58% Specific provision coverage 38.7% 37.0% 35.0% Loss rate 0.09% 0.08% 0.07% (1) Insured includes both LMI and Low Equity Premium National Australia Bank#48Commercial Real Estate - Group Summary1 Total $60.0bn 12.2% of Gross Loans & Acceptances Aus UK² NZ USA² SGA Asia/Other Total TOTAL CRE (A$bn) 43.0 9.2 5.4 1.2 0.4 0.8 60.0 Increase/(decrease) on Sep 11 (A$bn) 0.1 (0.7) (0.1) (0.2) (0.4) 0.4 (0.9) % of GLAS 11.4% 17.8% 11.9% 21.3% 10.2% 17.4% 12.2% Change in % on Sep 11 (0.3%) (0.6%) (0.3%) (2.4%) (6.3%) 6.2% (0.4%) Group Commercial Property by type Industrial 15% Other 6% Land 9% Group Commercial Property by geography Residential 14% Tourism & Australia 72% Leisure 5% Retail 24% Office 27% United Kingdom 15% New Zealand 9% USA 2% Asia 1% SGA 1% 95 (1) Measured as balance outstanding at March 2012 per APRA Commercial Property ARF definitions (2) Excludes SGA National Australia Bank Commercial Real Estate - Business Banking Total $42.9bn 11.4% of Australian geography Gross Loans & Acceptances State NSW VIC QLD Other Total Location % 34% 26% 22% 18% 100% Loan Balance < $5m 10% 10% 7% 5% 32% Retail 26% Loan Balance > $5m < $10m 4% 4% 3% 2% 13% Loan Balance > $10m 20% 12% 12% 11% 55% Loan tenor <3 yrs 26% 22% 19% 15% 82% Land 9% Loan tenor > 3 < 5 yrs 6% 3% 2% 2% 13% Office 29% Loan tenor > 5 yrs 2% 1% 1% 1% 5% Other 6% Average loan size $m 3.4 2.5 3.0 3.1 3.0 Security Level¹- Fully Secured 25% 22% 17% 15% 79% Partially Secured 4% 4% 4% 2% 14% Industrial 16% Unsecured 5% 0% 1% 1% 7% Residential 10% Tourism & Leisure 4% 90+ days past due Impaired loans 0.13% 0.08% 0.08% 0.02% 0.31% 1.07% Specific provision coverage 15.6% 0.26% 1.52% 19.3% 0.06% 2.91% 16.0% 25.1% 16.4% Vic 26% Qld 22% Trend Mar 12 Sep 11 Mar 11 90+ days past due 0.31% 0.20% 0.43% Impaired Loans 2.91% 3.12% 2.80% Specific Provision Coverage 16.4% 14.7% 16.6% NSW 34% Other 18% 96 (1) Fully Secured represents loans of up to 70% of the Market Value of Security. Partially Secured are over 70%, but not Unsecured. Unsecured is primarily Negative Pledge lending National Australia Bank#49Commercial Real Estate - UK Banking Total £6.0bn 17.8% of Gross Loans & Acceptances Residential 37%- Land 8% Tourism & Leisure 7% Region Location % North East South West Total 28% 29% 16% 27% 100% Loan Balance <£2m 14% 13% 8% 14% 49% Loan Balance > £2m <£5m 6% 6% 3% 6% 21% Loan Balance > £5m 8% 10% 5% 7% 30% Industrial 10% Average loan tenor < 3 yrs 19% 16% 11% 15% 61% Average loan tenor > 3 < 5 yrs 3% 4% 2% 5% 14% Other 3% Average loan tenor > 5 yrs 6% 9% 3% 7% 25% Average loan size Security Level¹ £0.75m £0.84m £1.00m £0.76m £0.81m Retail 19% Fully Secured Partially Secured 13% 14% 11% 15% 53% 14% 15% 5% 12% 46% Office 16% Unsecured 1% 0% 0% 0% 1% Trend Mar 12 Sep 11 Mar 11 Sep 10 90+ days past due 1.91% 0.88% 1.42% 1.47% Impaired Loans 10.46% 9.12% 8.13% 7.69% Specific Provision Coverage 25.21% 11.2% 9.1% 4.8% (1) Fully secured represents loans of up to 70% of the market value of security. 97 Partially secured are over 70%, but not unsecured. Unsecured is primarily negative pledge lending National Australia Bank Commercial Real Estate - NZ Banking Total NZ$6.9bn 11.9% of Gross Loans & Acceptances Region Location % Auckland Other Regions Total 38% 62% 100% Loan Balance < NZ$5m 10% 26% 36% Residential 6% Loan Balance > NZ$5m<NZ$10m 5% 9% 14% Industrial 17% Land 9% Loan Balance > NZ$10m 23% 27% 50% Loan tenor <3 yrs 35% 51% 86% Loan tenor > 3 < 5 yrs 1% 6% 7% Tourism & Leisure 5% Other 6% Loan tenor > 5 yrs 2% 5% 7% Average loan size NZ$m Security Level¹ 4.5 2.8 3.3 Fully Secured 23% 44% 67% Partially Secured 11% 12% 23% Unsecured 4% 6% 10% Retail 21% Office 36% 90+ days past due Impaired Loans Specific Provision Coverage 0.37% 0.19% 0.56% 0.16% 1.18% 1.34% 24.1% 16.3% 17.2% Trend Mar 12 Sep 11 Mar 11 90+ days past due 0.56% 0.50% 0.89% Impaired Loans 1.34% 1.66% 2.03% Specific Provision Coverage 17.2% 24.6% 21.3% 98 (1) Fully Secured represents loans of up to 70% of the Market Value of Security. Partially Secured are over 70%, but not Unsecured. Unsecured is primarily Negative Pledge lending National Australia Bank#50100 National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook <nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank Credit RWA movement Credit RWA movement September 2011 to March 2012 ($bn) 308.6 Sep 11 5.3 (9.1) (1.2) (3.4) 300.2 Net growth Methodology changes and optimisation Credit quality FX Mar 12 National Australia Bank#51Estimated impacts of Basel III: March 2012 (%) 101 8.03 Basel III Core Tier 1 (Act) (0.25) (0.04) (0.30) 0.36 (0.07) (0.15) Investment in WM NTAS EL>EP Credit Risk RWAS* Deferred Tax Assets Dividend (net of DRP Participation) Other# 7.58 1.04 0.66 9.28 Basel III Core Tier 1 (APRA proposals) RWA WM NTAS, Basel III DTA, Equity Adjustments Core Tier 1 Investments & Other (BIS)^ Estimated based on APRA response paper on Basel III capital reforms, released 30 March 2012. # Λ Counterparty credit risk (CCR) is estimated to add an additional $13 billion of risk weighted assets. APRA intends to release its proposed approaches to the implementation of the Basel III reforms relating to CCR once the Basel Committee has finalised these particular reforms. Other consists of equity investments (-10bps), 1,250% securitisation risk weighting and other immaterial movements. Assumes no change to the treatment of treasury shares. Group capital ratios (%) 180 102 National Australia Bank 7.12 9.19 11.33 7.58 9.70 11.26 8.03 10.17 ddd Mar 11 Sep 11 Core Tier 1 Tier 1 ■Total Capital Mar 12 11.52 National Australia Bank#52Asset funding Balance sheet ($bn) 757 757 Life Insurance Assets 68 Life Insurance Liabilities 67 Shareholders Equity¹ 38 Other Assets 103 Other Liabilities² 56 Liquid Assets 90 90 Short Term Funding 100 Term Funding < 12 Months 20 Short Term Funding of Core Assets 56 Term Funding > 12 Months 96 TFI 20% Core Assets 496 Customer Deposits 324 Assets Liabilities & Equity (1) Shareholder equity excludes preference shares and other contributed equity 103 (2) Other liabilities comprises mainly trading derivatives CFI 65% SFI 85% Funding profile remains robust Term funding maturity profile ($bn) Term Wholesale Funding Maturity Profile as at March 2012 15 25050 FY12 Term Refinancing Requirement National Australia Bank Government Guaranteed (Total $11bn) Non-Government Guaranteed Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Beyond The weighted average remaining maturity of the Group's term funding index qualifying (includes debt with > 12 months remaining term to maturity, excludes debt with < 12 months) senior and subordinated debt is 3.2 years (3.5 years as at September 2011) The weighted average remaining maturity of the Group's senior and subordinated debt is 2.8 years (2.9 years as at September 2011) ▸ The FY12 term funding requirement is largely driven by the need to refinance term debt that has less than 12 months remaining term to maturity during FY12 104 National Australia Bank#53Diversified funding issuance - March 2012 Issuer ($14.5bn) Type ($14.5bn) 105 BNZ 10% NAB 84% Currency ($14.5bn) USD 32% (Total Portfolio 27%) EUR 21% (Total Portfolio 18%) Senior Public Offshore 27% Clydesdale 6% Secured Funding Public and Private 31% Investor location ($14.5bn) UK 4% JPY 8% (Total Portfolio 8%) AUD 25% (Total Portfolio 32%) Other 9% (Total Portfolio 8%) GBP 5% (Total Portfolio 7%) USA 26% Europe 28% Senior Private Placement 18% Senior Public - Domestic 24% Asia (ex Japan) 4% Japan 9% Australia & New Zealand 29% National Australia Bank Increased cost of funding an Australian variable rate mortgage 106 160 Funding cost over the RBA cash rate (bps) 140 120 100 80 60 20 20 40 Liquidity Portfolio Costs Recovery via repricing Bank Bill/Overnight Index Swap Spread Term Funding Customer Deposits 0 Pre-crisis Dec 07 Jun 08 Dec 08 Jun 09 Dec 10 Jun 10 Dec 10 Jun 11 Dec 11 Mar 12 National Australia Bank#54107 108 UK FSA Capital Comparison - Basel II ▸ Summarised below are details of current key differences as pertinent to the Group and identified by the ongoing Australian Bankers' Association (ABA) study "Comparison of Regulatory Capital Frameworks - APRA and FSA".1 Item RWA Treatment - Mortgages Interest Rate Risk in the Banking Book (IRRBB) Wealth Value of Business in Force at acquisition Estimated Final Dividend DTA (excluding DTA on the collective provision for doubtful debts) Eligible Deferred Fee Income Capitalised Expenses Investments in Non-Consolidated Controlled Entities UK Defined Benefit Pension Scheme Details of differences APRA requires Loss Given Default estimate for loans secured by mortgages to be a minimum of 20% compared to a 10% minimum under FSA rules. This results in lower RWA under FSA rules. APRA rules require the inclusion of IRRBB within Pillar 1 calculations. This is not required by the FSA and results in lower RWA under FSA rules. This amount represents the value of business in force (VBIF) at acquisition of MLC, which is an intangible asset. VBIF is deducted from Tier 1 capital under APRA guidelines, whereas under FSA rules, it is deducted from Total capital. The FSA requires dividends to be deducted from regulatory capital when declared and/or approved. APRA requires dividends to be deducted on an anticipated basis, which is partially offset by APRA making allowance for expected shares to be issued under a dividend re-investment plan. This difference results in higher capital under FSA rules. APRA requires Deferred Tax Assets (DTA) to be deducted from Tier 1 capital, except for any DTA associated with collective provisions which are eligible to be included in the General Reserve for Credit Losses. Under FSA rules, DTA are risk weighted at 100%. APRA requires certain deferred fee income to be included in Tier 1 capital. The FSA does not allow this deferred fee income to be included in Tier 1 capital, which results in lower capital under FSA rules. APRA requires a deduction from Tier 1 capital for up-front costs associated with a debt issuance. The FSA requires costs associated with debt issuance not used in the capital calculations to follow the accounting treatment. APRA requires Wealth Net Tangible Assets (NTA) to be deducted 50/50 from Tier 1 and Tier 2 capital. The FSA allows embedded value (including NTA) to be included in Tier 1 capital and deducted from Total capital under transitional rules to 31 December 2012 (when it will revert to a 50/50 deduction from Tier 1 and Tier 2). The scheme continues to be in deficit as at 31 March 2011. Under FSA rules, the bank's deficit reduction amount may be substituted for a defined benefit liability. No deficit reduction amounts are presently being paid, therefore the liability can be reversed from reserves (net of tax) and no liability is required to be substituted at this time. (1) The above comparison is based on public information on the FSA approach to calculating Tier 1. Some items cannot be quantified where the FSA may have entered into bi-lateral agreements on specific items, which are not generally in the public domain Impact on Bank's Tier 1 capital ratio if FSA rules applied Increase Increase Increase Increase Increase Decrease Increase Increase Increase National Australia Bank UK FSA Capital Comparison - Basel II Estimated Impact on NAB's capital position ▸ The following table illustrates the impact on the Group's capital position considering these key differences between APRA and UK FSA Basel II guidelines ▸ This reflects only a partial list of the factors requiring adjustment 31 March 2012 - APRA basis RWA treatment - Mortgages¹ IRRBB (RWA) Tier 1 Capital % 10.17% Total Capital % 11.52% 1.10% 1.24% 0.25% 0.28% Wealth Value of Business in Force (VBIF) at acquisition² 0.47% 0.00% Estimated final dividend (net of estimated reinvestment under DRP / BSP) 0.36% 0.36% DTA (excluding DTA on the collective provision for doubtful debts) 0.19% 0.19% Eligible deferred fee income (0.07%) (0.07%) Capitalised expenses³ 0.04% 0.04% Investments in non-consolidated controlled entities (net of intangible component) 0.27% 0.00% UK Defined Benefit Pension 0.03% 0.03% Total Adjustments 2.64% 2.07% 31 March 2012 - Normalised for UK FSA differences 12.81% 13.59% (1) RWA treatment for mortgages is based on APRA 20% loss given default (LGD) floor compared to FSA LGD floor of 10% aligned to the Basel II Framework (2) This ignores any potential accounting differences between IFRS and UK GAAP (3) Capitalised expenses associated with debt raisings only National Australia Bank#55109 Basel II Risk Weighted Assets Asset Class ($m) Corporate & Business Mortgages Retail 31 March 2012 30 September 2011 RWAS RWA/EAD % RWAs RWA/EAD % 168,534 43% 172,208 47% 56,351 21% 51,620 21% 15,025 43% 16,198 46% Standardised¹ 52,253 63% 59,922 61% Other Assets 8,022 79% 8,700 82% Total Credit RWAs 300,185 38% 308,648 41% Market RWAS 5,277 2,968 Operational RWAs 23,810 22,255 IRRBB RWAS 6,281 7,198 Total RWAs 335,553 341,069 (1) The majority of the Group's standardised portfolio is the UK Clydesdale PLC banking operations National Australia Bank Additional Information Business Banking Personal Banking Wholesale Banking NAB Wealth NZ Banking UK Banking Great Western Bank Specialised Group Assets Asia Asset Quality Capital and Funding Economic Outlook National Australia Bank nab MLC Ca Clydesdale Bank Yorkshire Bank Bank of New Zealand Great Western Bank#56111 Economic outlook Australia ▸ Multi-speed economy expected to continue ▸ High $A affecting tourism/trade and manufacturing ▸ Rate cut expected to help softer sectors given low inflation outlook. Further near term cut possible. ▸ Expect year average GDP growth of 2.5% in CY 2012; 3.5% in CY 2013 ▸ Terms of trade have peaked in Q3 2011 and expected to fall further as global supply/demand imbalances ease ▸ Large mining investment projects (LNG etc) driving much of total capital spending ▸ Unemployment rate low by global standards but the trend in job growth remains sluggish China ▸ Domestic activity slowing (softer property market) ▸ Exports clearly softened ▸ Lower official growth target (cut from 8% to 7.5%) ▸ We still expect a soft landing ~ 8% GDP growth in CY 2012 % represent share of 31 March 2012 GLAs, Australia includes Asia 78% Economic conditions Annual % growth in global trade and GDP 1970 - 2013 1% 12% United Kingdom ▸ GDP growth forecast under 0.5% in 2012 ▸ Output well below its early 2008 level ▸ Credit demand affected by weak property market and de-leveraging in household and business sectors ▸ Credit growth expected to remain soft as income growth remains modest ▸ Sterling depreciation is assisting exports and economic rebalancing ▸ Interest rates at all time lows 9% New Zealand ▸ Recovery under way ▸ Housing market improving ▸ Commodity prices falling but still high ▸ Rebuilding in Christchurch started United States ▸ Modest drawn-out economic recovery ▸ Risk of recession clearly receded ▸ Labour market and credit picking up ▸ Interest rates to stay low National Australia Bank System credit growth % change year-on-year 24 21 18 15 12 9 6 3 0 8 18 (F) 16 Australia World economic growth 14 12 10 8 6 New Zealand 4 2 United Kingdom 0 -6 -9 -12 1970 World trade (LHS axis) -2 -4 Jan 90 Jan 93 Jan 96 1975 1980 1985 1990 1995 2000 2005 2010 IMF, OECD, Datastream, NAB Forecasts Jan 99 Jan 02 Jan 05 Jan 08 Jan 11 RBA, RBNZ, Bank of England, NAB Forecasts Jan 14 Real GDP % change year on year 12 10 8 6 4 2 0 Australia Annual % growth in emerging economies 16 14 New Zealand China - world no 2 (F) -> 12 India - world no 4 10 Brazil 8 -world no 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 -2 Mar 94 Mar 99 Mar 04 Mar 09 Mar 14 Datastream -6 -8 Mar 79 United Kingdom Mar 84 Mar 89 ONS, ABS, SNZ, Datastream, NAB Forecasts 112 (F) - Forecast National Australia Bank#57113 114 Australia regional outlook Economic CY12 CY13 CY09 CY10 CY11 Indicators (%) 1 (f) (f) GDP growth 1.4 2.5 2.0 2.5 3.5 Unemployment 5.6 5.0 5.1 5.4 5.3 rate Core Inflation 3.5 2.4 2.6 2.1 2.5 Cash rate 3.75 4.75 4.25 3.25 3.75 System FY09 FY10 FY11 FY12(f) FY13(f) Growth (%)² Housing 7.2 7.6 5.8 6.2 8.1 Other personal -5.5 2.9 -0.6 0.2 3.5 (incl cards) Business -4.1 -3.3 0.3 2.0 5.5 Total system credit 1.8 3.2 3.4 4.46.9 Total A$ ADI 7.5 deposits³ 5.6 8.3 8.5 10.0 (1) Percentage change at year end December, except for GDP, which is year-average at year end December, and cash and unemployment rates, which are as at end December (2) Percentage change at bank fiscal year end September (3) Total ADI deposits also include wholesale deposits (such as CDs), community and non-profit deposits but exclude deposits by government & ADIS ▸ The Australian economy slowed towards the end of 2011 with recorded growth of 0.4% in Q4. Fundamentally the economy slowed to around trend growth and has probably edged a touch lower in early 2012. Business confidence and conditions remain a touch below long run averages and forward indicators overall remain soft ▸ The economy continues to exhibit a multi speed nature ▸ The long-awaited mining investment boom is well underway and accelerating. Many services sectors (utilities, lawyers, business professionals, health etc) also report solid activity and confidence levels with strong orders ▸ The trade-exposed manufacturing sector however continues to struggle with poor conditions, while the construction industry has softened noticeably on the back of a softening property market and reduced fiscal spending. Activity in industries dependant on consumer demand - retail and wholesale - remains soft- especially discretionary retailing ▸ The latter has seen heightened retail discounting which in conjunction with a continuing high AUD has seen core inflation fall to levels towards the bottom of the RBA's target range - and could well go lower ▸ While the outlook for weakening global demand is likely to see further softening in commodity prices, they should remain high relative to history, keeping the terms of trade elevated. That in turn is likely to see the AUD remaining high by historical standards ▸ The RBA lowered the cash rate by 50bp at its May meeting with the aim of lowering borrowing rates significantly to help struggling sectors of the economy - given the prospect of relatively low inflation over the next year or two. With fiscal policy significantly tightened and the labour market likely to soften a touch we expect the RBA will lower the cash rate by a further 25bp in coming months. However, as 2013 develops, the case will probably build for the extra cut to be unwound ▸ Business credit growth has been fairly soft in recent months and is expected to remain moderate over 2012 - with business and consumer caution still very much to the fore. Consistent with high savings rates, personal credit growth is expected to remain soft. Housing credit has also remained relatively modest but could edge higher in the face of lower rates, a stabilising house price market and continued undersupply UK regional outlook National Australia Bank Economic CY10 Indicators (%) CY11 CY12(f) CY13(f) CY14(f) GDP growth 2.1 0.7 0.4 1.5 2.0 Unemployment 7.9 8.1 8.7 8.8 8.2 Inflation 3.3 4.5 2.6 2.0 2.1 Cash rate 0.5 0.5 0.5 0.5 2.0 System FY10 FY11 Growth (%) Housing 0.9 0.7 1.0 2.2 3.2 FY112f) FY13(f) FY14(f) Consumer 0.7 1.6 2.1 1.9 3.1 Business -3.3 -2.6 -2.8 -1.7 0.3 24 Total lending -0.6 -0.4 -0.3 0.8 2.1 Retail deposits 4.4 3.1 3.2 3.2 3.8 ▸ The UK economy has gone back into recession with GDP falling in late 2011 and early 2012. This is a much weaker performance than the Government had expected and output is still over 4% below its early 2008 level. The property market has been flat (houses) to down (commercial) ▸ Although activity has been cushioned by the lowest policy interest rates on record, the central bank's efforts to boost liquidity and the lagged impact of the big Sterling depreciation in 2007/8, it has been held back by pressure on household incomes and austerity in the public sector ▸ The UK economy needs to be 're-balanced' so that exports and business investment play a larger role in future growth while the contribution from consumer spending and the public sector falls below what was seen pre-2008. However, although exports are benefiting from improved UK cost competitiveness they have been held back by the weakness in key Euro-zone export markets. Even more concerning, business investment has stopped growing in the last year and boosting it forms a crucial part of the growth strategy ▸ Inflationary pressures are now subsiding and that should help limit the erosion of household incomes that has undercut consumer spending. However borrowing remains very low, the savings ratio is higher and unemployment has been trending higher-factors that should discourage any rapid recovery in consumer spending (which is still below its early 2008 level) ▸ Overall, the UK economy faces a long difficult period as private sector de-leveraging continues at a time of government cutbacks. The danger is that demand proves insufficient to give business the confidence to invest and the economy gets caught in a self-fulfilling low-growth trap. System credit growth is forecast to remain very modest and bad debts, which have been held down by lender forbearance and very low interest rates, could remain elevated for an extended period National Australia Bank#58NZ regional outlook Economic Indicators (%) CY10 CY11 CY12(f) CY13(f) CY14(f) GDP growth Unemployment 1.2 1.4 2.1 2.9 1.4 19 6.7 6.4 6.2 5.6 5.4 2.8 33 3.3 The latest business surveys are consistent with the moderate recovery we are forecasting for New Zealand. Although the rebuilding in Christchurch will drive a lot of construction through the next year, there is still quite a broad-based upturn in demand This upturn follows years of restrained retail spending and a sluggish housing market. House prices have plateaued since 2007 but have more recently begun to edge up. Households have lifted their savings effort, building up their bank deposits. This process suppressed consumer spending for a long time but retail sales growth improved in the latter half of 2011 and the surveys show that continuing The household sector has been gradually strengthening its balance sheet through very low borrowing, restrained spending and improved saving. Debt to income ratios are falling, liquid assets are building up. While it continues, this slow process should hold down economic growth but lay the foundations for a more sustainable economy later on Activity has been boosted by very high commodity export prices which have taken the terms of trade to levels not seen since the early 1970s boom. Commodity prices are now falling and the terms of trade are off their mid-2011 peak, but prices are still high by historical standards, supporting farm incomes We expect only a modest recovery in system credit growth as de-leveraging continues. Asset quality has deteriorated through the long period of sluggish economic performance but the system impaired loan ratio remains very low (around 1.4% at end 2011) Inflation 4.0 1.8 23 2.3 2.6 3.2 Cash rate 3.0 2.5 2.75 3.75 4.25 (end period) System FY10 FY11 FY12(f) FY13(f) FY14(f) Growth (%) Housing 3.1 1.6 1.4 2.4 3.4 Personal -3.3 -1.0 0 1.5 115 Business Total lending Household retail deposits -3.0 -0.8 1.3 2.5 -0 0.4 0.5 1.3 133 2.8 28 2.4 3.3 7.2 8.3 7.5 6.9 Australian housing prices and debt Real dwelling prices 1993 = 100 116 Index Housing affordability Index Index National Australia Bank Index 50 50 200 200 Capital cities 40 40 150 150 30 30 Australia 20 20 100 100 10 10 50 50 0 2002 2006 2010 1990 1994 1998 1986 Source: ABS, deflated by private household consumption deflator Index 150 Household debt-to-income ratio % 50 120 40 Total (LHS) Housing (LHS) 90 30 660 30 20 20 Household debt to housing assets (RHS) 10 0 1986 1990 1994 Sources: ABS; NAB; RBA 0 1998 2002 2006 2010 Note: Income is disposable income after tax and before interest payments Household sector excludes unincorporated enterprises 1986 1990 1994 1998 2002 2006 2010 Source: REIA 0 House prices have fallen from their peak in mid-2010, though remain at relatively high levels House price growth was most marked from mid 1990s to 2004, and also accelerated sharply through 2009 and the first half of 2010 ▸ Expectations are now for a stabilisation of prices in coming months followed by only marginal appreciation into the medium term Housing affordability and the debt service burden have improved in the face of lower mortgage rates (with recent cuts to help further) and household deleveraging. That said, the debt burden remains at historically high levels National Australia Bank#59Characteristics of the Australian Mortgage Market ▸ Solid population growth combined with an insufficient expansion in Australia's dwelling stock has led to a broad-based undersupply of housing in most locations ▸ The latest NAB Australian Property Survey indicates that overall demand for existing property improved slightly in the March quarter. Resident owner occupiers continue to dominate the market for existing properties - with investors shying away in the more difficult economic climate - although there was a small decrease in first home buyer activity in the first quarter of 2012. Access to credit, employment security and interest rate uncertainty continue to be the biggest impediments to demand side housing credit growth ▸ Around 80% of Australian mortgages are at variable rates, making the most common mortgage rate very sensitive to changes in monetary policy Ratio of Dwellings to Resident Population State average = 100 Index Index Queensland New South Wales Western Australia 102 102 100 Victoria 98 96 100 South Australia 98 Tasmania 96 1996 2002 2009 2000 2006 Sources: ABS; NAB Most common mortgage interest rates % Australian standard variable rate 8 6 US 30-year fixed interest rate 2 % 8 6 2 117 0 0 2001 2005 2009 Sources: RBA; US Federal Reserve National Australia Bank