One of Australia's four major banks, The National Australia Bank, announced a 51.4 percent drop in its cash earnings between October 2019 and March 2020, on Monday. Even as the dip is attributed to the ongoing coronavirus pandemic, the bank also announced plans to raise capital to the tune of A$3.5 billion through a non-underwritten share purchase plan aimed at raising approximately A$500 million, and an underwritten A$3 billion institutional placement
Halted trading of its shares
The cash earnings of the bank, which halted trading of its shares at the Australian stock exchange on Monday, were A$1.436 billion ($922 million) during the six-month period between October and March, according to the bank's half-yearly results, released 15 days ahead of schedule, reports Efe news.
These results are attributed to the increase in its reserves by around A$1.2 billion to cover future bad debts, which are largely expected to be linked to the pandemic.
"We are taking decisive action to manage the rapid and unprecedented upheaval caused by COVID-19 while at the same time being clear about our long term strategy for NAB," the bank's CEO, Ross McEwan said in a statement. Net profit from continuing operations was A$1.208 billion, a decline of 58.4 percent from a year ago.
In a letter to the Australian stock exchange, the NAB requested a halt in the trading of its ordinary shares on Monday.
"The trading halt is necessary as NAB expects to make an announcement to the ASX in connection with a proposed equity capital raising comprising an institutional placement (Placement) and share purchase plan," the bank said. Trading would remain halted until "an announcement in relation to completion of the Placement, or until the open of trading on Wednesday", the bank added.
Negative economic impacts of containment measures
In its half-yearly report, the bank said that measures implemented in Australia to contain the spread of COVID-19 had had a negative impact on the country's economic activity and although support packages by the government "provide significant support in the recovery phase", the timing and pace of the recovery remained uncertain.
"For Australia, we expect GDP to decline 8.4 percent by September 2020 compared to December 2019 and not return to pre-COVID-19 levels until early 2022, while unemployment is expected to peak at 11.7 percent in mid-2020 before partially recovering to 7.3 percent by December 2021," the bank added. There are currently 6,713 confirmed COVID-19 cases in Australia, with 83 deaths.