NAB Says Quarter Profit Flat, ANZ Sees First-Half Fall

National Australia Bank, the nation's top lender, reported cash earnings in its first quarter of about A$1.1 billion (US$721 million), broadly in line with last year, and a sharp rise in bad debt charges.

Separately, Australia and New Zealand Banking Group said it sees its first-half profit after credit provisions falling more than 15 percent on the same period last year. 

Australian banks have not been hit as hard by the global credit crunch as many of its U.S. and European peers, but cannot escape the effects of a slowing economy, rising bad debts and high funding costs.

The banks have been on an equity capital raising spree to strengthen their balance sheets as provisions are rising, but analysts still expect them to cut their dividends this year, a step last taken in the early 1990s,.

Analysts said that NAB's comments however would be reassuring to investors, and the bank's shares stood 0.7 percent firmer at A$18.70 in early trade.

"The NPAT numbers are a little bit ahead of where the market has them on an annualized basis, not withstanding higher bad and doubtful debt charges," said Mark Nathan, portfolio manager at Fortis Investment Partners. "Operationally, things must be going very well."

ANZ's shares rose 2.5 percent to A$12.65, while Commonwealth Bank of Australia rose 0.7 percent to A$29.17 and No. 2 bank, Westpac Banking, rose 0.9 to A$16.17.
     
Bad Debt Charges Up

NAB said in a trading update on Friday that charges from bad and doubtful debts for the quarter ended Dec. 31 were about A$824 million, exceeding the A$726 million in the first half of the previous business year.

About half of a specific provision charge of A$521 million in the quarter related to three individual name exposures, NAB said.

Analysts have forecast NAB's 2009 business year cash profit at A$4.4 billion, according to a Reuters poll of six analysts. In 2008 NAB reported a cash profit of A$3.9 billion.

Cash earnings, widely used by analysts as an indicator of core profit, exclude one-off items and non-cash accounting items and form the basis for dividends payable to shareholders.

On Monday, Commonwealth Bank said preliminary interim profit figures indicated a cash net profit of about A$2.0 billion, down from the previous year but more than 20 percent ahead of market consensus. It will report full first half results next week.

NAB's first quarter result was consistent with that of the previous corresponding period, the bank said, while revenue growth remained robust despite rapidly emerging weakness in the countries where it does business.

Revenue had softened in the United Kingdom, where the bank owns the Clydesdale and Yorkshire banks, due to significantly higher funding costs which could not be adequately recovered.

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Its wealth management operations had also seen weaker revenues due to declining investment markets and the slowing economy. Rising unemployment and falling investment was creating increased pressure on asset quality, NAB said.

NAB said it had raised over 60 percent of its full year 2009 term funding needs, and would continue to explore opportunities to further strengthen its capital position by utilizing existing Tier 1 hybrid capacity, where market conditions permit.

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