Costs impact NAB results
(6 February 2017 – Australia) National Australia Bank's (NAB) first-quarter profit slipped 1 percent to A$1.6 billion, as costs hindered the bank's earnings growth.
NAB said its cash profit for the December quarter was about 1 percent lower than the same three months last year, and 1 percent lower than the September quarter.
While revenue increased 1 percent, expenses grew at five percent, amid higher staffing costs. NAB said the lift in staffing costs was mainly because of a new enterprise agreement that came into effect in October, and redundancy payments to staff whose jobs had been cut.
Its net interest margin - which compares funding costs with what banks charge for loans and is a key influence on profits – was "broadly stable".
But NAB repeated that its funding costs remained "elevated", although it has passed on some of this cost to borrowers by increasing interest rates for property investors by 0.15 percentage points in December.
The earnings update is the first from a major Australian bank in 2017, and suggests the soft revenue conditions continued late last year.
NAB's charge for bad and doubtful debts fell 23 per cent to A$164 million, but this was mainly because it last year topped up its provisions for mining and agricultural loans.
In a sign of some slide in credit quality, the proportion of loans that were more than 90 days in arrears edged up from 0.85 per cent to 0.9 per cent.
NAB chief executive Andrew Thorburn said: "Our first-quarter expenses were impacted by the usual 1 October salary increases as well as elevated redundancy costs.”
The bank continued to target faster revenue growth than cost growth, Thorburn added, and was on track to deliver A$200 million in "productivity savings" over the full year.
"We are well advanced on a number of initiatives that give us confidence about second-half productivity and cost benefits."
"While the Australian and New Zealand economies remain resilient and continue to deliver solid growth, the operating environment has some challenges with funding costs remaining elevated and competition still intense," he said.
NAB's tier one capital was 9.5 percent of its assets, down from 9.8 percent at the full-year results because of its dividend payment.
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