NAB comfortable with big funding requirement

National Australia Bank will have to raise an extra $50 billion of long-term wholesale funding to meet the Basel Committee's new ruling on sustainable balance sheet ratios, the bank's chief financial officer, Mark Joiner, said yesterday.

NAB had a long-term wholesale funding target of $20 to $25 billion for the year to September and has already executed $24 billion of issuance.

Joiner said $16 to $20 billion of long-term funding is rolling over in any year and the amount needed for growth is around $5 billion.

Banks expect to have until the beginning of 2018 to meet the sustainable funding ratio target, although this has not yet been confirmed by the Australian Prudential Regulation Authority.

If NAB does get seven years it will add $7 billion a year to the funding task until the $50 billion target is met. Joiner said it was an achievable target.

Joiner was speaking at NAB's June quarter trading update yesterday. The bank reported unaudited cash earnings of $1.1 billion for the quarter, in line with the quarterly average in the March half.

Revenue was down one per cent and expenses were up three per cent. Bad and doubtful debts were down 17 per cent on the first quarter but up slightly on second quarter performance.

Chief executive Cameron Clyne said the personal banking strategy of slashing fees and being the lowest cost mortgage lender among the big four was working. New transaction accounts are being opened at nine times the rate of the June quarter last year, home lending is growing above the industry average and customer satisfaction scores are rising.

Clyne would not be drawn on the bank's approach to pricing home loans, except to say that the cost of funds was still going up and the bank needed to be flexible.

Clyne said business lending volume was above system, although system growth is weak. The bank's business lending fell 1.1 per cent in the quarter.

Clyne expects a return to stronger growth in business lending in 2011, with lending growth around 6.5 per cent.