National Australia Bank posts 8% increase in Q1 cash profit

By Staff Writer

Feb 16, 2016 04:04 AM EST

National Australia Bank, the biggest lender in the country, reported its first quarter trading update. The bank posted an 8% increase in its quarterly cash profit helped by robust results in wealth sector and rise in lending volumes.

The Melbourne-based lender reported cash earnings of A$1.7 billion for the first quarter, an increase of nearly 3% over the three-month average of the half-year that ended in September 2015. The statutory unaudited net earnings attributable to the owners totalled around A$1.5 billion for the reporting first quarter.

Cash earnings differ from statutory earnings in aspects like the removal of treasury shares, demerger and sale cost constant with prior disclosures as well as fair value and hedge futility, National Australia Bank noted. Quarterly revenue, on the cash earnings from continuing operations basis, rose nearly 2%.

Revenues, before legal settlement profit in the six-month period that ended September 2015, increased nearly 4% propelled by high lending volumes, robust results in wealth sector and an increase in net interest margin. The bank noted that the net interest margin (NIM) of the Group increased benefitting from repricing of home loan that is partly balanced by competition in business lending and rise in funding costs.

Expenses in the first quarter grew nearly 5%, affected by high personnel expenses. The bank currently estimates 2016 cash expenses from continuing operations, before currency impacts, to be low than prior year expense rate of 4.1%. Bad and Doubtful Debts charge dropped 52% to $84 million in the first quarter that ended December 31, 2015.

The Common Equity Tier ratio of the group amounted to 10.1% for the December 31, 2015 period, compared to a ratio of 10.2% in the September 30, 2015 period. The group's APRA leverage ratio was 5.4% for the December 31, 2015 period. Quarterly middling liquidity coverage ratio of the group was 119%.

In early February, the bank disposed of its Clydesdale Bank Plc after Andrew Thorburn left the British arm. Clydesdale is currently listed on London Stock Exchange. In 2015, the lender sold 80% of life insurance unit to Nippon Life, according to Reuters. Commonwealth Bank of Australia, another lender, reported a 4% increase in cash profit during the first six-month period, but the bad debts also increased considerably.

Brett Le Mesurier, an analyst at APP Securities PTY, said Bloomberg that now it is the right time for the bank to show off their efficiency in managing their businesses in Australia. The shares of the bank earned 0.5% to A$24.88 at Sydney trading session. Bloomberg said that the bank needs to widen its market share in domestic business loans and mortgages. "Our asset quality and balance sheet remain strong, notwithstanding recent volatility in markets and commodity prices," according to Andrew Thorburn, Chief Executive Officer.

Amid the volatility in the global market, the National Australia Bank was able to post an increase in its first-quarter cash earnings. The bank experienced a robust growth in wealth division helped by an increase in lending volumes.

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