NAB’s first quarter profit rises

National Australia Bank has posted a six per cent gain in first-quarter cash profit as record low interest rates helped loan revenues nudge higher.

Australia’s economy has slowed as a decade-long commodities price boom unwinds, but bank profits have mostly continued to grow thanks to rises in mortgage lending and a tight rein on costs. NAB has underperformed its rivals, however, due to problems with its UK business.

“This is a solid first-quarter result, which has seen the continued strengthening of our core Australian and New Zealand franchise and the further reduction of legacy issues,” NAB Group CEO Andrew Thorburn said in a statement.

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“Australian home lending continues to generate strong growth and has now delivered 20 consecutive quarters of above system growth.”

NAB, the country’s fourth biggest bank by market value, posted cash profit of A$1.65 billion ($1.28 billion) for the quarter ended in December. Revenues rose 4 per cent including the sale of the UK property loan portfolio, one of the legacy issues NAB has been keen to address. Net interest margin, a key gauge of profitability for lenders, was flat and slightly lower excluding the company’s markets and treasury divisions. Charges for bad and doubtful debts jumped 30 per cent to A$227 million but NAB said they were stable when economic cycle adjustments and provisions for the UK property portfolio were removed.

NAB’s statutory net profit of A$1.8 billion rose versus the A$1.4 billion it reported a year ago. The bank has made exiting its UK operations, which includes Yorkshire and Clydesdale bank branches, an “absolute priority” after writedowns for the business led to a 10 per cent decline in cash profits last year.

NAB sold £1.2bn ($1.8 billion) of mostly non-performing UK commercial property loans in December. NAB has a return on equity (ROE) of 10.9 per cent, the lowest among its major peers.