-- 1Q cash earnings hit record A$1.45 billion
-- Net profit drops 21%
-- Sour debt charges down 10%
(Adds CEO remarks in third paragraph, analysis of result from
fourth.)
By Caroline Henshaw
SYDNEY--National Australia Bank Ltd. (NAB.AU) reported record
cash earnings in the first quarter of its fiscal year on higher
revenue from its business and wholesale-banking divisions and lower
bad-debt charges at its troubled U.K. units.
Unaudited cash earnings, a measure closely watched by analysts,
rose to 1.45 billion Australian dollars (US$1.5 billion) in the
three months to Dec. 31, up from A$1.40 billion a year ago and
A$1.21 billion in the previous quarter. NAB said cash earnings were
up 4% compared with the quarterly average of the September 2012
half year.
"This is a pleasing result, especially given operating
conditions remain challenging both in Australia and the U.K.," said
Chief Executive Cameron Clyne in a stock exchange filing.
However, net profit in the quarter slumped by more than a fifth
to A$1.26 billion from A$1.6 billion a year ago after a drop in the
value of derivatives used to manage risk. NAB booked a A$375
million pre-tax loss from such instruments in the 2012 financial
year.
Revenue at Australia's fourth-largest lender increased 3% on
better sales at its wholesale division and improved customer
margins, which are worked out according to an assortment of
criteria, including lending margins, deposits, liquidity costs and
liability mix.
The result was helped by NAB holding back on passing on the full
extent of steep central bank interest-rate cuts over the past year.
The Reserve Bank of Australia, or RBA, last year reduced rates to
3%, the lowest level since the aftermath of the global financial
crisis, in an effort to boost sectors of Australia's economy
hardest hit by a slowdown.
Much of the cash earnings rise was driven by a stronger
performance at NAB's business-banking division, the largest in the
country accounting for about a quarter of the nation's commercial
lending market.
Bad business-loan charges, an area Mr. Clyne has singled out as
challenging, declined in the period, while earnings in the division
business-banking division as a whole were boosted by higher margins
as the bank repriced commercial loans.
Overall, NAB said bad and doubtful debts fell 10% from a year
earlier to A$554 million in the quarter.
Macquarie analysts said the result was "much stronger" than its
own A$1.3 billion cash earnings forecast, citing an estimated 10
basis points of repricing of mortgage and business loans, and
better-than-expected falls in bad-debt charges.
Ballooning sour property loans at NAB's struggling Clydesdale
and Yorkshire banks in the U.K were a key reason why profit slumped
22% in the last financial year.
Write to Caroline Henshaw at caroline.henshaw@wsj.com
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