* NAB announces plan to divest retirement fund manager MLC
* CEO says decision not related to revelations at Royal Commission
* Sharp drop in cash profit due to costs related to job cuts
* NAB shares slip amid wider market gains (Recasts, adds CEO quote, background, shares)
SYDNEY, May 3 (Reuters) - National Australia Bank said it was looking to exit part of its wealth management arm by 2019 as it continues to simplify its business structure, and posted a sharp drop in six-month cash profit on restructuring costs related to job cuts.
The announcement underlines NAB's resolve to join a push by global lenders to do more business online and less transactions over counters. Automation and exiting non-core businesses are key to the strategy of Australia's third-largest lender.
"The complexity in the bank is just killing us and we need to simplify it," CEO Andrew Thorburn said on Thursday, when the lender also reported a 16 percent year-on-year drop in cash earnings for the six months ended March.
NAB's aim is to streamline wealth management by exiting the segment's A$78 billion ($58 billion) retirement fund manager MLC, one of the largest in the country, while retaining its advisory businesses JBWere and nabtrade, Thorburn added.
The lender said it expected to either demerge and float MLC, or sell it by the end of 2019. Other Australian banks are also increasingly moving to exit non-core businesses with high compliance risks, like wealth management.
Thorburn, however, said NAB's plans for MLC were not related to the revelations of wrongdoing in the advice industry at a powerful ongoing inquiry into the country's financial sector.
"It really has had nothing to do with what has come out in the Royal Commission on this piece," Thorburn said.
Under questioning at the inquiry last month, NAB executives said the bank was assessing whether to "remain" in the financial advice business because laws requiring it to act in the best interest of clients had made it less attractive for "big organisations" to be in the business.
NAB shares were down 0.6 percent at midday on Thursday, while the broader market was 0.8 percent higher.
EARNINGS REFLECT RESTRUCTURING
NAB reported half-year cash earnings, which exclude non-cash accounting items, of A$2.76 billion. This matched an average estimate of six analysts polled by Thomson Reuters.
Excluding restructuring costs related to job cuts, earnings were flat at A$3.28 billion, while net interest income rose about 6 percent to A$6.75 billion. NAB said around 1,050 full-time employees had already left the company.
Net interest margin, a key gauge of profitability, improved 5 basis points. But competition and tighter lending controls dragged down the bank's margins on mortgages by 4 basis points to 1.34 percent.
Shortly after the misconduct inquiry started in February, NAB introduced stricter conditions to assess mortgage applications and lowered the amount it was prepared to lend to a ratio of seven times a borrower's income from eight times.
Despite a 15 basis point increase to its core capital ratio during the first half, at 10.21 percent, NAB is still behind the regulator's target of 10.5 percent.
It also lags two of its large peers - Westpac Banking Corp and Australia and New Zealand Banking Group, which have already met the regulator's target.
The banks have until 2020 to meet the target.
NAB maintained its interim dividend at A$0.99 per share. ($1 = 1.3353 Australian dollars) (Additional reporting by Rushil Dutta in Bengaluru; editing by Stephen Coates and Himani Sarkar)