Well, pitching yourself as being customer-friendly by ending charges and fees, such as the controversial home loan exit imposts (and insulting its peers in its advertising) seems to have paid off for the National Australia Bank.
The bank, Australia’s fourth-largest by market capitalisation (remember it used to be number one a decade ago), yesterday reported a record first-half $2.668 billion cash profit up 22%, and topping the market’s earnings forecasts.
Westpac’s cash earnings hit $3.17 billion and the ANZ’s underlying profit (roughly equal to cash profit) increased 23% to $2.818 billion.
So it’s 4th in earnings terms. The CBA has a third quarter update next Wednesday.
Shares in NAB rose as much as 3% in trading yesterday, in contrast to the falls that greeted the results this week from the ANZ and Westpac.
NAB shares ended up 62c, or 2.4%, at $27.01 against a 0.3% rise in the wider market (which was down in morning trading).
The strong profit increase was driven by a better performance in its personal banking division, which has led the NAB’s contentious "break up campaign" to win mortgage market share.
(Mr Clyne told the media yesterday that this campaign will continue.)
The bank said it increased its share of the home loan market by 1%, which helped the personal bank lift its profit by 36%.
Revenue fell 4.5% to just over $8.2 billion.
The Group’s banking cost to income ratio improved by 1.60 percentage points to 43.9% ($4 billion in total).
Net interest margin was 2.23%, down from 2.26% a year ago and 2.24% in the September second half of the 2010 year.
The NAB said yesterday net profit rose to $2.428 billion for the six months to March 31 from $2.095 billion in the first half of the 2010 year.
As good as the result was. The real story, as with the ANZ and Westpac, was the fall in bad and doubtful debts.
In the Nab’s case that was down 19.7% to $988 million from a year earlier.
NAB lifted interim dividend 13.5% to 84c per share fully franked, up from 74c a year earlier.
Westpac boosted its interim dividend 17% to 76c, while the ANZ lifted its interim 23% to 64c a share.
NAB’s expenses grew by 3.4% to $4 billion, mainly as a result of investments in frontline staff.
NAB chief executive Cameron Clyne said in the statement the Australian economy looked strong (a contrast to the caution from the ANZ’s Mike Smith and Westpac’s Gail Kelly).
"I think broadly we still see quite a few positives in the economy.
"Unemployment is relatively low and there is an early sign that businesses are looking to invest again," he said.
Mr Clyne said he expected business lending to continue strengthening to the end of calendar 2011, as did Ms Kelly on Wednesday.
Mr Clyne said it suggested the bank’s strategy of keeping interest rates lower; cutting banking fees and aggressive marketing was working.
"This result is a sign that there is some momentum in that strategy," he said.
Mr Clyne said there was a rising interest rate environment globally at the moment, but thought it was likely that Reserve Bank of Australia would wait several months to lift rates.
He also said there had been no financial impact on the result from recent computer problems that caused delays in payment processing for customers.
(Westpac had a computer problem yesterday.)
Cash earnings for business banking rose 7.9% to $1.2 billion and personal banking saw cash earnings jump 36.3% to $432 million, thanks to higher home lending volumes and the reduced charge for bad debts.
The bank’s UK division’s cash earnings rose 26.2% to STG77 million ($A116.03 million) on a lower bad debt charge.
According to the twice a year report from KPMG Australia’s big four banks posted a 16% cent rise in cash profit for the first half of 2011, but revenue and margin growth were weak and are likely to pose a challenge over the year ahead.
The combined cash profits of the Commonwealth, Westpac, ANZ and NAB was $12 billion for the first half of the fiscal year, boosted by lower bad debts and cost-cutting.
Return on equity averaged 16.9% in the first half, compared to 16.2% in the second half of 2010.
Net interest margin was marginally higher, at 225.5 basis points (2.255%), compared to 224.5 basis points in the prior first half.
Underlying earnings growth was 8%, half-on-half, with interest income up 3% and bad debt costs falling 6%.
