Photographer: Carla Gottgens/Bloomberg

National Australia Cash Profit Rises 8% After U.K. Spinoff

  • Loss from U.K. exit will be A$4.2 billion, at top end of range
  • CEO Thorburn says asset quality, balance sheet are `strong'

National Australia Bank Ltd. posted an 8 percent increase in first-quarter earnings after spinning off its troubled U.K business and squeezing more profit from home loans.

Unaudited cash profit, excluding the U.K. division, climbed to about A$1.7 billion ($1.2 billion) in the three months ended Dec. 31, the Melbourne-based lender said Tuesday in a statement. Net income for the quarter was A$1.5 billion. That’s down from A$1.80 billion the bank reported a year earlier.

NAB’s quarterly update is the first since the lender exited the U.K this month. Chief Executive Officer Andrew Thorburn is returning the lender to its roots in Australia and New Zealand to boost returns that have lagged competitors for years. The current challenge is to expand market share in Australian mortgages and business loans.

“Now, National Australia’s management needs to show how well they can run their domestic business,” Brett Le Mesurier, a Sydney-based analyst at APP Securities Pty, said by phone before the market update.

National Australia shares gained 0.5 percent to A$24.88 at 10:38 a.m. in Sydney, trimming this year’s loss to 15 percent. The benchmark S&P/ASX 200 index rose 0.2 percent.

The loss from the U.K. exit will be about A$4.2 billion, the bank said Tuesday. That’s at the top end of a range of A$1.71 billion to A$4.67 billion that the bank estimated in December. The loss won’t affect National Australia’s dividend policy, it said.

National Australia’s quarterly earnings come after Commonwealth Bank of Australia on Feb. 10 posted its slowest first-half profit growth since the financial crisis and warned of the risks posed by global economic turbulence.

“Our asset quality and balance sheet remain strong, notwithstanding recent volatility in markets and commodity prices,” CEO Thorburn said in the statement.

National Australia said its net interest margin climbed as the bank repriced mortgages, though the benefit was partly offset by higher funding costs and competition for business lending.

Australia & New Zealand Banking Group Ltd. reports first quarter results Wednesday. Westpac Banking Corp. doesn’t disclose quarterly earnings.

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