Fewer bad loans prompts 'good' result for major

by Calida Smylie08 May 2014
Fewer loan losses have spurred National Australia Bank on to a net profit increase of 15.8% in the last year.

NAB’s half-year results to end of March were released on the ASX this morning, showing net profit of $2.86 billion, an increase of $390 million from the March 2013 half-year results.

Cash earnings were $3.15 billion, an increase of $247 million or 8.5% on the corresponding period a year ago. NAB said this result reflects improved performances from its banking businesses, which were however partly offset by higher UK conduct related charges.

Its home loan growth over the year is up 5.8%, with retail customer satisfaction increasing 120 basis points.

The charge for bad and doubtful debts (B&DD) was $528 million, a 52% reduction from the prior corresponding period and 37% lower than the charge for the September 2013 half year.

Fewer loan losses in Australian banking and the UK businesses were the main contributors to the reduction, the bank said.

NAB group CEO Cameron Clyne said a major contributor to the “good” result is the significant work undertaken over the past five years to reduce risk in the business.

“We have reduced exposure to higher risk segments including NAB UK CRE and parts of Australian business lending, and increased home lending exposure.

“While not without some cost in terms of business volumes and revenue, the benefits can be seen over the 12 months to 31 March 2014 in a material reduction in our B&DD charges, down 52%, and an $8.1 billion reduction in credit risk weighted assets attributable to improved credit quality and portfolio mix.”

NAB’s revenue increased by 2.6%, but decreased by 1.2% if foreign exchange movements are excluded.

Expenses at a headline level rose 11.6%, largely driven by movements in foreign exchange rates and higher UK conduct related charges.

Excluding these items operating expenses increased by 2.9% and compared to the September 2013 half year increased by 0.4%.

The interim dividend is 99 cents per share fully-franked, an increase of 6 cents per share on the prior interim dividend.

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