The ratings on National Australia Bank Ltd. (NAB) reflect its well-diversified and soundly based banking franchise, solid asset quality, and strong underlying cash earnings capability. Underlying earnings are supported by its solid asset quality, partly reflecting benign domestic conditions and core underwriting and recovery skills. Even so, ongoing restructuring, large one-off costs, and profit on the sale of noncore subsidiaries have buffeted headline earnings. A revitalized management team and strategy is expected to improve the bank's operational effectiveness and efficiency, but this improvement will be gradual. The retention of regulatory sanctions has moderated capital and strategic flexibility. The bank's is also involved in some very competitive market segments that may affect its overall earnings. With total on-balance sheet assets of
