National Australia Bank posted a 2.3% increase in cash earnings boosted largely by fees and gains from hedging, underscoring the growth challenges faced by the nation’s lenders as regulators step up oversight.
Cash earnings, which excludes one-time items, for the six months ended March 31 were $3.29 billion, in line with expectations. Statutory net profit stood at $2.54 billion compared with a loss last year, the Melbourne-based lender said in a statement Thursday.
Net interest income, which shows the difference between interest earned on loans fell 3.1% while other operating income surged 17.4%, the bank said.
NAB’s earnings show the struggle Australian lenders face to boost their interest income amid competition and a regulatory tightening to protect the banking system from a housing implosion. Rival ANZ Bank on Tuesday saw revenue and margins fall and managed to boost profits by cutting costs and reducing the charge for bad debts.
“The operating environment for banks remains challenging, including heightened regulatory change, digital disruption and increasing stakeholder expectations,” Chief Executive Officer Andrew Thorburn said in the statement.
NAB’s net interest margin, a measure of lending profitability, fell 11 basis points from a year earlier though flat from the preceding half. The measure was hurt by market movements and lending competitions, NAB said.
The total charge for bad and doubtful debts was $394 million, up $19 million
or 5.1%. NAB said as it set aside more money for potentially risky commercial real estate loans.
Expenses rose 0.8% reflecting higher personnel costs including redundancy charges, it said.
It declared an interim dividend of 99 cents unchanged from the previous year.
Common equity tier 1 ratio, a measure of its ability to absorb future losses, stood at 10.1% as at March 31, up 34 basis points from six months earlier, NAB said.
Earnings were boosted by a 17.9% increase in the corporate and institutional banking business profit and the New Zealand units 13.5% gain.
Return on equity, which indicates how efficiently a company reinvests shareholders funds, dropped 30 basis points to 14%.