National Australia Bank shareholder dividends are safe - for now - after the lender reported a 4.2 per cent rise in full-year cash earnings to $6.48 billion.
Some analysts had suggested NAB could cut its dividend, as rival ANZ did at the half-year, to bolster capital following the loss of income resulting from the recent sale of 80 per cent of its life insurance business.
Chief executive Andrew Thorburn on Thursday says the bank's capital position means it can comfortably pay the same 99 cents it handed out both a year ago and with its first-half results.
But UBS banking analyst Jon Mott says "dividend sustainability remains questionable".
Net interest margin declined two basis points to 1.88 per cent due to higher funding costs, and charges for bad and doubtful debts rose 7.0 per cent to $800 million because of exposures to large corporate customers.
"The board considers our dividend payout in light of our capital position, our earnings and our outlook; in making that determination this time, they are very comfortable paying out 99 cents per share," Mr Thorburn said.
"If you look at our capital ... it positions us well should there be future regulatory capital requirements but we don't want to jump that gun until we know the facts."
The decision not to reduce the dividend lifted NAB's payout ratio to 80.8 per cent from 79.5 per cent a year ago, above the long-to-medium term 70-75 per cent target range outlined by chief financial officer Gary Lennon in May.
Investors greeted the decision warmly, driving up NAB's share price by 49 cents, or 1.78 per cent, to $27.95 at 1340 AEDT.
Rivals Commonwealth Bank, Westpac and ANZ were all about half a per cent lower, broadly in line with the benchmark ASX 200.
NAB's second-half cash earnings of $3.263 billion slightly exceeded Deutsche Bank's forecast of $3.172 million, and UBS's $3.139 million.
The life insurance sale and the big loss recorded against the sale of Clydesdale Bank in the UK dragged the bank's statutory net profit down 94.4 per cent to $352 million, but Mr Thorburn said the bank was now clear to focus on its core Australian and New Zealand businesses.
"These changes have been achieved while delivering an improved operating performance and maintaining a strong balance sheet, sound asset quality and tight control of costs," Mr Thorburn said.
Mr Thorburn said NAB had revised its lending criteria for apartment mortgages, with the Reserve Bank warning this month of a possible glut of units in Brisbane and Melbourne.
The proportion of Australian home loans 90 days or more overdue rose to 0.52 per cent, up from 0.51 per cent six months ago and 0.45 per cent at the same time last year.
"We made good progress in restoring home loan volume growth back to system levels after a period of significant change in pricing and credit policies," Mr Thorburn said.
NAB'S FY FIGURES
* Cash earnings up 4.2pct to $6.48b
* Net profit down 94.4pct to $352m
* Final dividend unchanged at 99 cents, fully franked
