NAB Q3 profit crimped by higher impairment charges, compliance costs

[BENGALURU] National Australia Bank on Tuesday reported a 3 per cent fall in third-quarter cash profit on higher credit impairment charges and subdued revenue growth.

Australia's No. 4 lender by market value posted cash earnings of A$1.65 billion (S$1.65 billion) for the three months ended June 30, compared with A$1.7 billion last year. The cash profit figure excludes one-offs and non-cash accounting items.

Australia's top banks are facing higher costs and tougher regulation after a series of governance scandals triggered a quasi-judicial inquiry into the financial sector which has uncovered widespread misconduct.

The inquiry heard last week that NAB would compensate thousands of pension fund customers who had paid for advice they did not receive. Documents submitted at the inquiry revealed the corporate regulator was investigating whether to impose criminal penalties over the matter.

"As we make progress towards resolving several previously disclosed regulatory compliance investigations, we expect to recognise additional provisions in the 2H18 result," NAB chief executive Andrew Thorburn said.

Credit impairment charges rose 9 per cent during the period, while expenses rose 2 per cent due to higher compliance costs, among others, the bank added.

Revenue during the quarter rose 1 per cent, while net interest margin declined slightly on higher competition in the home lending space, the bank said in a limited trading update.

Short-term funding costs have more than doubled since August last year but political pressure has prevented lenders from passing on higher costs to customers in light of the damaging revelations from the commission of inquiry.

Slower demand for mortgages makes matters worse. Data last week showed growth in Australian home loans for investment hit record lows in June, falling for the first time since the global financial crisis.

Last week Australia's biggest lender, Commonwealth Bank of Australia, posted its first annual profit drop in close to a decade.

NAB's common equity tier-1 ratio fell to 9.7 per cent at June 30, from 10.21 per cent on March 31.

REUTERS