NAB released its trading update today. Overall cash profit was a little below expectations, and loss provisions were up. Looking in more detail, revenue rose approximately 4%, but after excluding gains on the UK Commercial Real Estate (CRE) loan portfolio sale and SGA asset sales, on a like for like basis, increased approximately 2% thanks to higher markets income and growth in lending balances over the quarter. Group net interest margin (NIM) was flat, but after excluding Markets and Treasury, was slightly lower. Expenses increased approximately 4% after excluding specified items in the September 2014 Half Year. The main drivers include timing of enterprise bargain agreement-related salary increases, normalisation of performance based incentives and investment in the core franchise. The charge for Bad and Doubtful Debts for the quarter rose 30% to $227 million, but was stable excluding releases from the Group Economic Cycle Adjustment (ECA) and UK CRE overlay in the September 2014 Half Year.
The Australian business appears to be settling now, with business banking losses easing despite intense competition. Mortgage lending is still strong. No further comments were made on the UK exit strategy. The Group’s Basel III Common Equity Tier 1 (CET1) ratio was 8.74% as at 31 December 2014, an increase of 11 basis points from 30 September 2014. As previously announced, the Group will target a CET1 ratio of 8.75% – 9.25% from 1 January 2016, based on current regulatory requirements.
