The National Australia Bank (NAB) saw earnings sag slightly in the three months to the end of December, the bank’s first quarter, as a rise in expenses more than offset a small rise in group revenue – a situation that will worry investors and could see the shares sold off later today.
In fact investors and analysts will have concerns about the quality of the earnings because in addition to the rise in costs, the bank said the result was helped by lower provisions.
The fall in profit would have been higher but for a sharp improvement in its bad and doubtful debts in the quarter. That was despite slight worsening in credit quality, according to the bank.
In a trading update issued this morning that bank said that its unaudited cash earnings fell by around 1% to $1.6 billion for the quarter and its statutory profit was also down the same amount to a similar figures.
The NAB said that was on a 1% rise in revenue (on a cash earnings basis) while group net interest margin “was broadly stable.”
The bank saw expenses “rise approximately 5%. Key drivers include higher personnel costs mainly related to the timing of the 1 October 2016 Enterprise Bargaining Agreement salary increases and redundancies, combined with higher project related costs including regulatory spend, and increased depreciation and amortisation. These items were partly offset by productivity savings.”
"The charge for bad and doubtful debts for the quarter declined 23% to $164 million. A key driver was the non-repeat of the increase in the collective provision overlay for mining, mining related and agricultural sectors in the September 2016 Half Year.
"The ratio of 90+ days past due and gross impaired assets to gross loans and acceptances was 0.90% at 31 December 2016, up from 0.85% at 30 September 2016. Over the same time period specific provision coverage of gross impaired assets increased from 38.3% to 43.0%,” the bank said.
