NAB quarterly profit hits $1.45b as lagging UK arm shows some life
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 52¢, 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.
Frequently Asked Questions about this Article…
NAB reported group cash earnings of $1.45 billion for the December quarter, a result the bank says came despite challenging economic conditions in Australia and the UK.
The rise in cash earnings was driven by wider lending margins across the group and a fall in bad debts among NAB's core business customers, plus lower charges and reduced costs in its British operations.
The bank reported tentative signs of recovery in its British arm: better earnings were attributed to lower bad-debt charges and reduced costs, suggesting the worst may be behind it for the UK business.
Investors welcomed the update and pushed NAB shares up 1.8%, or 52 cents, to $28.63 following the profit announcement.
NAB highlighted the underlying strength of its Australian business, noting wider margins in Australia helped lift group earnings during the quarter.
Yes. During the quarter NAB cut 500 full-time equivalent staff in its British business and closed 38 branches as part of cost reduction measures.
A senior analyst cited in the article, Brett Le Mesurier, said higher margins reflect the mortgage pricing strategies used by NAB and other major banks, along with developments in funding markets — and majors did not pass cash-rate cuts fully on to mortgage borrowers.
While the update showed improved earnings, the bank warned operating conditions remain challenging in Australia and the UK, and the British business has been a key investor concern despite recent improvement.
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