NAB third-quarter cash profit rises 9 percent, but margins fall

National Australia Bank has reported 9 per cent growth in its unaudited third quarter cash earnings to $1.75 billion.

The bank also said it expects to book additional provision charges of up to ₤500 million ($1.05 billion) in its full-year results relating to misconduct in its United Kingdom arm.

Revenue and expenses increased 4 percent.

The bank may need to provide as much as 500 million pounds ($775 million) for compensation for mis-selling payment protection insurance and hedging products to United Kingdom customers, it said.

NAB is planning to spin-off up to 80 per cent of Clydesdale to shareholders later this year and float the remainder, subject to gaining regulators’ approval.

NAB’s third quarter profits rose 9 per cent compared with a year earlier.

The charge for bad and doubtful debts for the quarter fell 15 percent to A$193 million.

The trading update, released on the Australian Securities Exchange (ASX) today, saw the NAB Group chief executive, Andrew Thorburn referencing continuing momentum across the Australian and New Zealand businesses. Net interest margin, the spread between interest earned and cost of funds, declined due to competition and weaker markets income, the lender said, without providing specific figures.

As part of its capital raising announcement, ANZ revealed its had lifted its cash profit by 4.3 per cent to $5.18bn in the nine months to June to, based on unaudited results.

NAB was ordered by the UK’s Prudential Regulation Authority in March to provide £1.7 billion capital support to the Clydesdale “in relation to potential future legacy conduct costs” ahead of its demerger and stock market float. We continue to focus on delivering value and improved services to our customers by investing in new digital channels and the continued regeneration of our branch network.

Mr Joshi said the extra provisions would not affect capital or bank dividends, but would flow through to the bank’s full-year profits.

NAB, like its peers in the Australian banking industry, uses cash earnings for internal reporting as it better reflects the underlying performance of the group, it said.

At the same time it will give details of the demerger and IPO on which it said it had made “substantial progress” in the third quarter and which is slated to take place before the end of the year.