National Australia Bank Reports 3Q Profit Drop -- Update

   By Alice Uribe

SYDNEY--National Australia Bank Ltd. warned the outlook remains highly uncertain after volatile markets and low interest rates combined to drive a decline in third-quarter earnings.

The bank saw its closely watched net interest margin stay broadly stable, though it flagged further remediation costs, adding that the "amounts and timing remain uncertain."

"The Covid-19 pandemic continues to challenge our customers and our bank, with varied impacts across industries and communities. The outlook remains highly uncertain," NAB said.

NAB, the country's fourth-largest bank by market value and the biggest business lender, recorded an unaudited net profit of 1.50 billion Australian dollars (US$1.07 billion) for the three months through June. No comparable figure was disclosed, but it compares with a profit of A$1.70 billion reported by the bank a year ago.

Cash earnings, a measure adjusted for fair value and hedging movements and is the basis for calculating dividend payouts, was A$1.55 billion, which NAB said fell by 7.0% against the same quarter a year earlier.

Compared with its first-half quarterly average and excluding large notable items, cash earnings increased by 24%, NAB said. Third-quarter revenue was also up 10% on the average of the first half on higher markets and treasury, and the bank said expenses for the quarter rose 2%.

"Achieving our target of broadly flat fiscal 2020 expenses is now increasingly challenging, in part reflecting Covid-19 related effects such as additional customer support and workout resources," the bank said.

It noted that this is also expected to impact cost growth in fiscal 2021.

NAB in April launched a A$3.5 billion capital raising, while also slashing its interim dividend by 64% as it responded to upheaval caused by the coronavirus pandemic. Its peers, Westpac and ANZ, both deferred making decisions on their interim dividends, while Commonwealth Bank of Australia this week said its final dividend would be A$0.98.

NAB said Friday that action to strengthen its balance sheet is allowing it to support customers and keep the bank safe.

Credit impairment charges fell by 2% to A$570 million compared with the first-half quarterly average. There was a rise in the ratio of impaired assets and loans overdue by 90 days or more against gross loans and acceptances by 9 basis points to 106%.

NAB said this was primarily due to increased delinquencies in its Australian home loan portfolio, where customers were not part of its pandemic-related loan deferral program.

NAB reported a 51% drop in cash earnings for the six months through March to A$1.44 billion. The result was dragged down by A$1.04 billion in one-off charges, including higher credit impairment charges and mark-to-market losses on its liquids portfolio within Markets and Treasury.

Write to Alice Uribe at alice.uribe@wsj.com

(END) Dow Jones Newswires

August 13, 2020 19:23 ET (23:23 GMT)

National Australia Bank (PK) (USOTC:NABZY)
Historical Stock Chart
From Dec 2024 to Jan 2025