National Australia Bank (ASX:NAB) Announces First Quarter Trading Update
Financial Performance
National Australia Bank reported a 2% decline in cash earnings for the December quarter of 2024 compared to the second half of 2024 quarterly average. Underlying profit grew by 4%, offset by higher credit impairment charges and income tax expenses. Revenue increased by 3%, primarily driven by higher Markets & Treasury income, while expenses rose by 2% due to increased personnel and financial crime-related costs.
Business Growth
Deposit balances grew by 2%, and Australian home lending increased by 1%, showing improved momentum compared to the system average. Business lending balances rose by 2%, including a 1% growth in SME business lending. The bank delivered further efficiency benefits, targeting productivity savings of over $400 million in FY25 and aiming for lower operating expense growth compared to FY24.
Asset Quality
The credit impairment charge for the quarter was $267 million, with collective provisions to credit risk-weighted assets decreasing by 2 basis points to 1.45%. Non-performing exposures to gross loans and acceptances rose by 4 basis points to 1.43%, mainly due to deterioration in the Business & Private Banking portfolio and higher arrears in the Australian mortgage portfolio.
Capital and Liquidity
The Group’s Common Equity Tier 1 (CET1) ratio stood at 11.6%, down from 12.4% as of September 2024, primarily due to the payment of the final 2024 dividend and growth in credit risk-weighted assets. The leverage ratio was 4.8%, and the liquidity coverage ratio averaged 139% for the quarter. The bank raised $15.2 billion in term funding through January 2025.
Strategic Initiatives
National Australia Bank is focused on becoming the most customer-centric company in Australia and New Zealand. Initiatives include opening branches on Saturdays in 29 high foot traffic locations, joining BioCatch Trust Australia for enhanced fraud protection, and supporting Australian businesses and farmers with discounts on green loans through a new $300 million program in partnership with the Clean Energy Finance Corporation.
Executive Comments
Andrew Irvine, NAB CEO, stated, “We have started FY25 well. Our 1Q25 performance is sound and execution of our refreshed strategy is underway. We remain optimistic about the outlook and are well placed to manage our business for the long term and deliver sustainable growth and returns for shareholders.”
Motley Fool contributor Matt Burgess has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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