Bank shares turned higher yesterday thanks to a combination of sellers’ remorse from Friday, a reasonable trading update from the National Australia Bank (NAB) and a solid full year profit for Bendigo and Adelaide Bank (BEN).
After losing 7.5% on Friday, ANZ shares recovered 1.5% yesterday to $30.60.
The Commonwealth Bank (CBA) added 1% to $82.14, ahead of tomorrow’s annual results and capital raising. Westpac (WBC) also added 1% to $32.68, and National Australia Bank shares jumped 1.5% to $33.32 after it reported a 9% lift in third quarter profits to $1.75 billion.
Investors were encouraged more by assurances from the NAB that it had made “substantial progress” on its exit from its embattled and costly UK operations.
In the June quarter, NAB posted a cash profit of $1.75 billion, up from $1.6 billion a year ago. Net profit, which excludes one-offs, came in at $1.85 billion.
The bank said the result was driven by lower bad and doubtful debt charges and higher revenue from its Australian operations, and better earnings from its New Zealand and wealth management divisions.
However, NAB’ said its net interest margin declined due to weaker markets and Treasury income, as well as competition for business lending in Australia.
NAB 1Y – NAB June quarter cash profit up 9% to $1.75bn
NAB said it had made substantial progress on the sale of Clydesdale Bank, which dominated the lender’s third-quarter results last year when it was forced to flag further provisions.
“We continue to make good progress addressing our legacy and low returning assets to enable greater focus on building a stronger Australian and New Zealand business,” chief executive Andrew Thorburn said in yesterday’s statement.
NAB says it still intends to pursue a demerger of approximately 70% to 80% of Clydesdale Bank’s holding company National Australia Group Europe Ltd and its subsidiaries to NAB shareholders, and sell the balance of 20% to 30% through an initial public offering to institutional investors.
NAB’s full-year profits (September 30 year) will be dragged down by the bank booking up to 500 million pound ($1.05 billion) in provisions relating to misconduct in Clydesdale – though this will come from money that has already been set aside for that purpose.
Only last month, NAB finished its complete divestment of Great Western Bancorp, following the sale of its remaining 28.5% holding in the regional US lender. That will cost the bank around $70 million in write downs.
