National Australia Bank Ltd (NAB) chief executive Cameron Clyne says the move to cut the bank’s dividend for the first time in 18 years is the right decision, but he admits that the bank’s performance has disappointed shareholders.

NAB announced last week that it would slash its first half dividend by 25 per cent due to the challenging market environment.

Mr Clyne defended the cut, saying it was necessary to set up a conservative balance sheet.

“It’s not something that we take lightly, (but) we think it’s the right thing to do for the business,” Mr Clyne said on ABC Television on Sunday.

“We’re going to have a more challenging environment, asset quality will deteriorate.

“The right and prudent decision is to cut the dividend.

“We have to run the bank to deliver sustainable returns over time, and that’s what we’ve got to focus on.”

Mr Clyne said he was not interested in whether NAB was the number one bank or ranked fourth among the big four Australian banks.

He said he wanted NAB to be the bank that was delivering “appropriate” returns to shareholders.

“Quite clearly, we have not delivered the shareholder returns that people would expect, and we have been underperforming,” Mr Clyne said.

“But whether we are one, two, three or four - I’d rather be four and delivering total shareholder return than measure myself by being number one and not delivering to our shareholders.”

Mr Clyne said NAB’s business in the United Kingdom was not delivering the returns that were expected.

He said that five years ago in the UK, NAB had a “bad bank in a good market”.

“But now we’ve got a good bank in a bad market.”

Mr Clyne said it was in the interest of NAB shareholders to exit the UK at the moment.

Last week he flagged a stronger focus on the group’s businesses in Australia, where the economy is faring better than others.

“We have no current plans on any acquisitions in the Australian market or offshore for that matter, but you have to keep an open mind and that is what we’re doing,” he said.

AAP