Balanced approach, strong core business help NAB increase 1Q15 profit
(11 May 2015 – Australia) A solid first quarter result from National Australia Bank (NAB) has been delivered with unaudited cash earnings of A$1.65 billion, up 6 percent on the year earlier.
NAB chief executive Andrew Thorburn said the core Australian and New Zealand franchise continued to strengthen.
“We are making progress against the strategic priorities I announced on 30 October 2014, including our focus on the priority segments in Australia and New Zealand, comprising home loan, SME and Specialised Business customers.
“We know that we need to maintain this focus, including a balanced approach to investing and the achievement of productivity savings,” Thorburn said.
He also highlighted Australian home lending, which had delivered 20 consecutive quarters of above-system growth.
Intense competition for business lending means NAB’s core Business Banking franchise is expected to improve in time.
“Further significant improvements in asset quality over the quarter are pleasing and reflect both the benign operating environment and the initiatives undertaken over recent years to improve our risk profile,” Thorburn said.
“Importantly, we also continue to make good progress in dealing to our low returning assets.
“Following on from the IPO of a 31.8 percent stake in Great Western Bank in October last year, we sold an additional £1.2 billion (A$2.35 billion) parcel of higher risk loans from our UK CRE portfolio in December, reducing the portfolio to approximately £800 million compared to the original balance of £5.6 billion in October 2012,” he said.
Australian Banking cash earnings increased over the period, benefitting from stronger markets income, continued good growth in mortgage lending and improved business lending volumes, partially offset by a lower NIM primarily relating to business lending competition.
Over the quarter home lending grew at 1.4x system while growth in business lending represented 0.9x system.
NAB Wealth cash earnings improved over the quarter benefitting from higher insurance premiums and stable claims and lapses, combined with the impact of higher funds under management.
NZ Banking local currency cash earnings rose over the quarter due to higher revenue from increased loan volumes, and lower B&DD charges.
UK Banking local currency cash earnings increased over the quarter reflecting lower charges for B&DDs.
Revenue fell slightly, due to the non-recurrence of a gain arising from a property sale and leaseback transaction in the September 2014 Half Year.
On 8 May, NAB also announced a A$5.5 billion capital raising - the biggest in Australian corporate history.
NAB's capital raising involves the selling of new shares, with shareholders entitled to buy two new shares for every 25 they currently own.
It will increase the amount of shares on issue by 8 percent, diluting earnings per share and putting downward pressure on future dividend payments as they are spread amongst a bigger shareholder base.
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