NAB posts solid growth in cash earnings!

National Australia Bank Ltd

NAB Details

For June 2017 quarter, NAB has reported 2% qoq revenue growth, with growth in lending and improved Group net interest margin (NIM) partly offset by lower Markets and Treasury income. However, expenses up 2% due to increased investment spend and higher Group NIM largely reflects loan repricing and more favourable funding conditions. Unaudited cash earnings grew 2% to $1.7 billion versus March 2017 Half Year quarterly average and 5% versus prior corresponding period, reflects improved revenue growth and stronger asset quality. Bad and doubtful debt charges (B&DDs) fell 12% to $173 million, reflecting improved asset quality trends and non-repeat of the collective provision overlay for commercial real estate raised in the March 2017 Half Year. Further, ratio of 90+ days past due (DPD) and gross impaired assets (GIAs) to gross loans and advances (GLAs) was 0.80%, declined 5 basis points (bps) from March 2017 mainly reflecting improved conditions for New Zealand dairy customers.Group Common Equity Tier 1 (CET1) ratio stood at 9.7%, compared to 10.1% at March 2017 mainly reflecting the impact of the interim 2017 dividend declaration and 17 bps for higher risk weights due to previously advised mortgage model changes. Leverage ratio stood at 5.3% (APRA basis), while quarterly average liquidity coverage ratio (LCR) was 127%, and Net Stable Funding Ratio (NSFR) was 108%.

Capital ratios; (Source:  Company reports)

The major bank levy became effective from 1 July 2017 and is estimated to cost NAB approximately $375 million annually, or $265 million post tax, based on 30 June 2017 liabilities. For the full year, bank remain confident of achieving more than $200 million in productivity savings and, excluding the impact of the bank levy. The Australian and New Zealand economies remain resilient with solid growth supported by strong population growth and low unemployment. Australian business conditions rose again in the June quarter to their highest level since early 2008, with broad based strength across industries. However, the household sector faces some challenges with high levels of household debt, muted wages growth and subdued consumer sentiment. We reiterate a “Buy” recommendation on the stock at the current market price of $30.17


NAB daily chart; (Source: Thomson Reuters)

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