The National Australia Bank (NAB) has joined the trend of banks in reporting an uplift in cash earnings for the latter months of 2013.
The NAB told the market this morning that in the first quarter its cash profit rose 7% to $1.55 billion.
That follows solid updates from the ANZ and the strong effort from the Commonwealth Bank (CBA). Bendigo and Adelaide Bank (BEN) also produced a solid first half profit result.
The NAB said net profit, which includes one-off items, was about $1.4 billion.
The main difference between statutory and cash earnings related to the elimination of treasury shares and the effects of fair value and hedge ineffectiveness, the bank said.
Revenue increased by 1.0%.
Higher lending balances were being partly offset by lower customer margins which, the bank said.
NAB 1Y – NAB lifts Q1 cash earnings
The NAB said its net interest margin – a measure of the profitability of its loans – was being hurt by higher holdings of liquid assets and the effect of falling interest rates on capital.
Expenses rose 3.0% over the period, with much of that due to adverse foreign exchange rate movements, the bank said.
"The group achieved a solid first quarter result, with a continuation of the trends evident in the 2H13 result, including further improvement in asset quality and good growth in mortgages," NAB chief Cameron Clyne said in a statement this morning.
NAB, which owns the Clydesdale and Yorkshire banks in Britain, said bad debts from the UK had decreased over the quarter.
But it warned that there could be higher costs coming from continuing consumer complaints about the mis-selling of financial products.
"While UK customer redress costs were negligible in the quarter there remains a wide range of uncertain factors relevant to determining the total costs associated with conduct related matters," the bank said this morning’s statement.
"Regulators continue to take an active stance in our management of customer claims, including for payment protection insurance and interest rate hedging products. There has also been an increase in the level of complaints and settlements relating to some tailored business loans.
"Accordingly, the risk that additional provisions will be required for UK conduct related matters has increased since the 2013 full year results."
In other words, there’s an unknown financial penalty coming from the UK the size of which won’t be apparent until the interim results in May, and then the final figures in November.
