National Australia Bank, the nation's top lender, beat forecasts with a 23% rise in first-half cash earnings on Thursday, on strong loan growth and rapid progress at its U.K. divisions.
NAB -- which owns Bank of New Zealand and Britain's Clydesdale Bank and Yorkshire Bank -- reported cash earnings of A$2.196 billion (US$1.815 billion) on an ongoing basis in the six months ended March, up from A$1.788 billion from a year ago.
Eight analysts on average had forecast cash earnings of A$2.093 billion. Estimates ranged from A$2.043-A$2.194 billion.
NAB's earnings beat the most bullish analyst forecast, but the company did not give any specific outlook. However, Chief Executive John Stewart warned bad debts were expected to rise to long-term averages from recent historic lows.
"All our main markets are looking good and therefore we have a positive outlook," Stewart told reporters. "I think, we have probably passed the bottom of the credit cycle. But there will not be major change, it is just that it will get worse from now on, although gently," he added.
Australian banks have benefited from 16 years of economic growth, with a three-decade low unemployment rate pushing down bad debts. A mandatory pension scheme and a four-year bull run in share markets have also contributed to profit growth.
But competition from non-bank lenders and foreign banks has compressed margins, with analysts expecting credit growth to slow in the wake of three interest rate increases last year.
Cash earnings exclude one-off items and non-cash accounting adjustments. Cash earnings from its U.K. businesses jumped 29% to A$324 million, accounting for about 15 percent to NAB's total cash profits.
NAB, which has 24% of Australia's business loan market and is the second-biggest mortgage lender, is in the last leg of a three-year restructuring program. The company reported a 13.7% rise in loan growth, while its cost to income ratio fell to 50.3% from 55.6% from a year ago.
But Stewart said NAB could do more to improve efficiencies.
Shares in NAB have risen 9.1% so far in 2007, underperforming an 11.8% rise in the benchmark S&P/ASX 200 Index in the same period.
NAB was Australia's best performing bank stock in 2006 and has performed broadly in-line with the eight-stock S&P/ASX 300 Bank Index this year so far.
NAB To Withdraw Listing on NYSE
Separately, NAB announced it plans to withdraw its listing of American depository shares from the New York Stock Exchange. The decision follows legal changes making it easier for foreign companies to terminate the Securities & Exchange Commission registration.
Stewart said the delisting is part of the bank's program of streamlining operations and reducing costs. NAB delisted from the Tokyo and London stock exchanges during 2006.
"NAB remains fully committed to its staff and customers in the U.S.," said Stewart in a statement.