CANBERRA: National Australia Bank Ltd. posted a 9.4 percent increase in third-quarter profit as lower bad-debt charges helped offset a drop in interest margins. The lender flagged more provisions for its U.K. unit.
Unaudited cash profit, which excludes one-time items, climbed to about A$1.75 billion ($1.3 billion) in the three months ended June 30 from A$1.6 billion reported a year earlier, the Melbourne-based lender said Monday. The bank may need to provide as much as 500 million pounds ($775 million) for compensation for mis-selling payment protection insurance and hedging products to U.K. customers, it said.
National Australia, which raised A$5.5 billion in May to bolster capital in the nation’s largest rights offering, is targeting the sale of its U.K. unit by year-end. The lender is shifting focus to its Australia and New Zealand businesses and is the fastest-growing mortgage lender among the so-called Big Four banks.
“The additional U.K. charges reduce full-year earnings and in our view lower the probability of NAB’s shareholders ultimately getting a material part of this provision back once it completes compensation,” said Victor German, a Sydney-based analyst at CBA Institutional Equities. “Credit quality metrics remained favorable, which is positive.”
National Australia shares gained 0.3 percent at 10:57 a.m. in Sydney, compared with a 0.2 percent advance for the benchmark S&P/ASX 200 Index. The lender slumped 5.6 percent last week, the biggest weekly slide in two months.
The U.K. Prudential Regulation Authority earlier this year required the lender to provide 1.7 billion pounds in capital support to the U.K. unit as a condition for sale. The additional charges will be set off against the capital support, National Australia said Monday.
Unaudited net income rose to A$1.85 billion from A$1.7 billion last year. Charges for bad and doubtful debts in the quarter dropped 15 percent to A$193 million as the measure fell at its Australian unit, it said. Net interest margin, the spread between interest earned and cost of funds, declined due to competition and weaker markets income, the lender said, without providing specific figures.
The bank’s common equity Tier 1 ratio, a measure of its ability to absorb future losses, climbed to 9.94 percent, up 107 basis points from three months earlier, mainly due to the rights offering, it said. Revenue and expenses increased 4 percent.
The results underscored the “continuing momentum in our Australian and New Zealand business, improvements in asset quality and further progress made toward addressing legacy issues,” Chief Executive Officer Andrew Thorburn said in the statement.
National Australia’s earnings follows the 4.3 percent cash-profit increase that Australia & New Zealand Banking Group Ltd. posted last week. Commonwealth Bank of Australia releases its earnings for the year ended June on Wednesday.
Separately on Monday, regional lender Bendigo & Adelaide Bank Ltd. reported a 13 percent rise in underlying cash earnings for the year to June 3
