National Australia Bank scrip outperformed other major banks on Tuesday after the country’s largest business lender said it enjoyed an earnings recovery during the December quarter.
Cash earnings for the three months were up 1 per cent to A$1.65 billion on the corresponding period last financial year.
The quarterly report was light on detail with the bank not disclosing key P&L items such as interest revenue or precise information for movements in interest margins.
The profit increase was mostly attributable to cost reductions and sharply lower bad debt charges.
Revenue declined by 3 per cent following lower returns from markets and treasury activities, but the bank revealed that this was partly offset by higher fee and commission income.
Managing director Ross McEwan controversially weighed in to the emotion-charged debate regarding state lockdowns due to the COVID-19 crisis.
McEwan raised concerns about the impact of governments’ measures aimed at stemming outbreaks of the virus.
“Improving economic and health outcomes in Australia and New Zealand are encouraging, as are the reductions we are seeing in deferral balances,” he said.
“However, there are still a number of uncertainties requiring further clarity.
“These include the impact on customers of ongoing health alerts and measures put in place to contain the spread of COVID-19, and the wind-down of deferral and JobKeeper programs.”
One of the curiosities in NAB’s December quarter disclosures was the addition of 440 new roles in the business and private banking division.
The expansion of the division’s resources was notable because NAB’s leading position in the business lending market was eroded by CBA and ANZ in the quarter.
According to disclosures in its latest Pillar 3 statement issued on Tuesday NAB’s on-balance sheet credit exposure to corporate and SME borrowers declined by more than $1 billion.
NAB said it would add another 110 roles to the division in the current financial year, but did not provide any guidance on whether it expected business lending volumes to increase significantly.
The headline grabber for broking analysts from the quarterly update was the negligible credit impairment charge of $15 million.
This was materially lower than the charge recorded in the December quarter 2019 ($185 million) and the September quarter 2020 ($1.03 billion).
NAB’s share price closed up 27 cents or 1 per cent to $25.56 on above average turnover.