NAB jaws turn negative

Expense growth skipped ahead of revenue growth at National Australia Bank over the December 2014, the bank said in a periodic trading update.

NAB said expenses "increased approximately four per cent excluding specified items" (a bevy of restructuring items in 2014).

Revenue "increased approximately two per cent, benefitting from higher markets income and growth in lending balances over the quarter," the bank said.

But the group net interest margin was flat and, after excluding markets and treasury, the NIM was "slightly lower" although, as is typical in a trading update, the actual figure was not stated.

The bank's core Australian franchise is responsible for much of this decline, with "a lower NIM primarily relating to business lending competition," Andrew Thorburn, the bank's chief executive said in a statement.

Thorburn said: "we are making progress against the strategic priorities I announced in October, including our focus on the priority segments in Australia and New Zealand, comprising home loan, SME and specialised business customers."

He said NAB needed to "maintain this focus, including a balanced approach to investing and the achievement of productivity savings," which may read as a warning of expenses outstripping revenue growth in the near term.

Thorburn cautioned that: "the improvement in our core business banking franchise will take time."

He said volume growth was "now around system levels and we are well advanced on the hiring of additional business bankers. However, we continue to see intense competition for business lending."