SYDNEY--National Australia Bank Ltd. (NAB.AU) said first-half
profit jumped 23% as earnings from personal and wholesale banking
improved, but warned of rough seas ahead for the nation's
economy.
In the six months to Mar. 31, net profit at Australia's
fourth-largest bank by market value was 2.52 billion Australian
dollars (US$2.56 billion), up from A$2.05 billion a year earlier,
National Australia Bank said in a stock-exchange filing on
Thursday.
Cash profit, a measure closely watched by analysts that smoothes
out one-time items, rose 3% to A$2.92 billion. The figure beat the
A$2.89 billion forecast by six analysts polled by The Wall Street
Journal ahead of the result.
Group Chief Executive Cameron Clyne said there were "challenges
remaining" for Australia's economy, adding that business and
consumer confidence remained fragile even after steep rate cuts by
Australia's central bank.
"It's a little too early to tell" whether the cuts have had any
impact on the economy, Mr. Clyne told journalists on Thursday.
"Consumers look beyond rate cuts just for a spurt of confidence.
They look to the future as well, and there's still a lot of
uncertainty in the global economy."
The most valuable of Australia's lenders a decade ago, National
Australia Bank has lagged its peers since the financial crisis as
its struggling U.K. business has eroded profit. Like other lenders,
it's also been battling a slowdown in the domestic economy.
Cash profit from business banking rose 8.3% as bad debt charges
fell by A$120 million from the immediately preceding half. Personal
banking income climbed 19% from a year earlier on better margins
and improving volumes.
The central bank Tuesday cut interest rates to a record low
2.75%. It was the seventh time it has lowered its benchmark rate
since November 2011. The surprise move, aimed at spurring consumer
spending as a mining boom that's powered growth for a decade cools,
puts the official rate lower than during the depths of the
financial crisis.
Still, Australia's banks, among the sturdiest in the world, have
proven resilient to the slowdown. Last week, National Australia
Bank's rivals Westpac Banking Corp. (WBC.AU) and Australia &
New Zealand Banking Group Ltd. (ANZ.AU) reported consensus-beating
first-half results, helped by improving profit margins, higher
trading income and cost-cutting.
Both paid out large returns to shareholders--including a special
10 cent dividend from Westpac--sparking a jump in their share
prices. National Australia Bank said Thursday it would pay an
interim dividend of 93 cents a share, compared with 90 cents a year
earlier.
Last year, ballooning sour debts at the bank's Yorkshire and
Clydesdale banks dragged annual net profit down 22%, the first fall
since 2009. The poor result, at a time when Australia's other major
banks were reporting record results, triggered a backlash against
executive pay at the group's annual meeting in December. Mr. Clyne
pledged three months later that he would strip A$800 million from
the bank's annual costs by 2018.
Bad and doubtful debt charges at the bank added up to A$1.09
billion in the first half of 2013. That was similar to the A$1.13
billion reported a year earlier but down A$142 million from the
immediately proceeding half, thanks to lower charges at the bank's
U.K. and Business Banking divisions.
Mr. Clyne said the restructuring of the U.K. business was
proceeding at a faster pace than expected, with 1,100 of the
planned 1,400 job cuts already made. Its U.K. bad debt charge was
£185 million in the half, down from £197 million a year
earlier.
"The U.K. is having the weakest recovery since the 1930s," Mr.
Clyne said. "Were pleased with the U.K. as a whole. If the economy
doesn't have any further deterioration then we have prospects in
the U.K."
The lender has tried to squeeze more profit from its corporate
loan book, the biggest in the country, which has been hurt by weak
credit demand and rising bad debt among smaller companies. Things
may improve if business confidence picks up and companies start
borrowing more.
A survey by East & Partners published this month found 47.1%
of small-to-medium-sized businesses planned to borrow from banks by
the end of June, up from 44.2% a year earlier.
National Australia Bank has also been pushing hard into
Australia's A$1.3 trillion home-loan sector by offering the lowest
interest rates to customers of all the biggest four lenders. On
Tuesday, it became the first to pass on the central bank's 0.25%
rate cut in full.
Write to Caroline Henshaw at caroline.henshaw@wsj.com
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