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NAB posts $1.5bn profit

National Australia Bank has posted a $1.5 billion profit in the December quarter.

The bank’s quarterly cash earnings – its preferred measure that excludes one-off costs and gains – was $1.7 billion, up eight per cent on the same period a year ago.

The unaudited earnings update shows revenue increasing two per cent on the average of the previous two quarters, due to growth in lending and better wealth management results.

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NAB also benefitted from an increase in net interest margin – that is the gap between the interest rate the bank pays to borrow money (such as from depositors) and the rate it lends it out at.

The bank said its rising margin was due to “home loan repricing”, in other words rising mortgage rates, partly offset by increased funding costs and more competition for business lending.

NAB said its costs rose five per cent over the quarter, largely related to salary increases and redundancy costs associated with some projects reaching completion.

However, the rise in operating costs was largely offset by a 52 per cent fall in bad and doubtful debts during the quarter to $84 million.

NAB said its bad debt charges were lower due to “improved asset quality” and the non-repeat of a mining and agricultural sector overlay top-up in its September half-year results.

The bank has warned that the demerger of its British operations CYBG will likely result in a $4.2 billion loss being recorded in its half-year accounts, however this will not be included in its underlying cash result and will not affect dividend payments.

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