NAB National Australia Bank Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--National Australia Bank Ltd. (NAB.AU) has seen a rise in bad-debt costs, stung by its exposure to mining and agriculture, and an increase in funding costs that has weighed on its key profit margin.

The bank's net profit was about 1.6 billion Australian dollars (US$1.2 billion) in the three months through June. It didn't provide a year-earlier comparison, but the unaudited figure is a drop from the A$1.85 billion reported for the same period a year ago.

The economies of Australia and New Zealand remain resilient and continue to grow amid heightened global uncertainty, Chief Executive Andrew Thorburn said Monday. Funding costs for the latest period were higher, although asset quality remains strong and the bank remained focused on controlling costs, he said.

Since taking the helm in August 2014, Mr. Thorburn has refocused the bank on its core franchises in Australia and New Zealand in a bid to close a return-on-equity gap with the country's other big banks.

Early in the year it listed CYBG PLC (CYBG.LN), a company that housed its British operations Clydesdale Bank and Yorkshire Bank. That came after it agreed a deal last year to sell an 80% interest in its life-insurance business to Nippon Life Insurance Co. and sold its remaining stake in regional U.S. lender Great Western Bancorp Inc. (GWB), which it floated on the New York Stock Exchange the year before.

A A$4.2 billion loss for spinning off the U.K. operations pitched NAB to a first-half loss, although it opted to hold its interim dividend steady.

Third-quarter cash earnings--a measure followed by analysts that excludes some one-time costs and gains--were about 3% lower that a year earlier at A$1.6 billion from the bank's continuing operations, NAB said.

It said its revenue for the quarter was broadly stable against the quarterly average of the first half of the financial year as growth in lending was offset by lower net interest margin. NAB's net interest margin, a profit measure based on the difference between the rate at which a bank borrows and lends, was slightly lower, excluding impacts on markets and treasury operations, it said.

The bank's charge for bad and doubtful debts rose 21% to A$228 million for the quarter, an increase NAB said largely reflected an unusually low charge a year earlier as well as an increase in the bank's collective overlay for mining and agriculture. The ratio of impaired assets and loans 90 days or more past due to gross loans and acceptances was 0.81% at the end of June against 0.78% on March 31.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 14, 2016 18:27 ET (22:27 GMT)

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