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NAB quarterly profit hits $1.45b as lagging UK arm shows some life

8 Feb 2013 THE AGE
BY CLANCY YEATES


NATIONAL Australia Bank has raised hopes that its struggling British business may have put the worst behind it, with group cash earnings climbing to $1.45 billion despite challenging economic conditions in Australia and overseas.

After falling profits and mounting shareholder discontent in 2012, the bank showed tentative signs of recovery in its profit update on Thursday for the December quarter.

The troubled British business, which has been plagued by losses and become a key concern for investors, reported better earnings due to lower charges for bad debts and lower costs.

Although NAB said economic conditions in Australia and Britain were challenging, cash earnings were up nearly 4 per cent across the group, as the bank benefited from wider lending margins and a fall in bad debts among its core business customers.

Chief executive Cameron Clyne said the rise in earnings also reflected the underlying strength of its Australian business, where NAB experienced wider margins.

"This is a pleasing result, especially given operating conditions remain challenging both in Australia and the UK, notwithstanding recent improvements in financial markets," Mr Clyne said.

Investors welcomed the result, pushing up NAB shares by 1.8 per cent, or 52ยข, to $28.63.

Aside from the positive news on the British business, the result also pointed to healthy profits in Australia. Margins across the group rose in the quarter, during which NAB and other majors failed to pass on cuts to the cash rate in full to mortgage borrowers.

A senior analyst at BBY, Brett Le Mesurier, said the higher margins reflected the mortgage pricing strategy used by NAB and the other majors, as well as developments in funding markets.

The bank cut 500 full-time equivalent staff in its British business in the quarter and closed 38 branches.

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