National Australia Bank has recorded a cash profit of $1.7 billion for the June quarter on better revenue growth and stronger asset quality. The unaudited cash earnings for the third quarter were up 2 per cent on the quarterly average of the first half result and 5 per cent higher than the year ago three-month period.
The bank said revenue was up 2 per cent, compared to the first half result, due to growth in lending and higher net interest margin, largely reflecting home loan repricing and less pressure on funding costs.
“This is a strong result which reflects continued discipline and focus. Cash earnings and revenue are both higher, asset quality has improved and our capital and funding positions remain sound," NAB chief executive Andrew Thorburn said.
“It is reassuring to have our business performing well and our balance sheet settings sound during a period of significant and ongoing regulatory change."
The major bank levy came into effect on 1 July 2017 and is estimated to cost NAB approximately $375 million annually, or $265 million post tax, based on our 30 June 2017 liabilities.
NAB’s charge for bad and doubtful debts for the quarter fell 12 per cent to $173 million, largely reflecting improved asset quality trends and non-repeat of the collective provision overlay for commercial real estate raised at interim.
The bank’s common equity tier one ratio, stood at 9.7 per cent at June 30. APRA has set out a CET1 target of 10.5 per cent for the nation’s banks by 2020 as part of efforts to make the system 'unquestionably strong'.
The NAB chief said he was confident of achieving more than $200 million in productivity savings and, excluding the impact of the bank levy, expect to deliver positive ‘jaws’.
Thorburn was optimistic on the Australian and New Zealand economies but, like his colleague Ian Narev, pointed to the challenges faced by the household sector with high levels of household debt, muted wages growth and subdued consumer sentiment.
Analysts are tipping the bank to deliver a cash profit of $5.9 billion for the year to end-September. The bank’s common equity tier one ratio stood at 9.7 per cent at June 30. APRA has set out a target of 10.5 per cent for the banks.