National Australia Bank is set to return more capital to shareholders after announcing a fresh on-market purchase of up to A$1.5 billion worth of its ordinary shares. The bank revealed details of the latest buy-back on Tuesday after releasing a trading update that showed cash earnings rose 5.8 per cent to $1.9 billion in the June 2023 quarter compared to the corresponding period last year. Investors reacted positively to both announcements, with NAB shares outperforming major peers and most other listed banks. NAB scrip rallied for most of the day and closed up 1.3 per cent - the strongest of the major banks – to $28.70. The bank is currently sitting on a common equity tier one capital ratio of 11.9 per cent, which is expected to fall to 11.6 per cent after the latest buyback is completed. The company has retired around $5 billion worth of shares since it embarked on a protracted share repurchase program in August 2021. While that program was completed earlier this year, chief executive Ross McEwan said the bank was still holding regulatory capital above its target range of 11 to 11.5 per cent. “This (latest buyback) decision is consistent with our focus on maintaining a strong balance sheet through the cycle, while progressively reducing our share count over time,” he said. NAB’s higher operating profit in the quarter was a somewhat remarkable feat given that the bank posted only modest loan growth and suffered a five basis point decline in its net interest margin to a sector-lagging 1.72 per cent. The bank posted solid growth in small business lending, but volumes running through its corporate and institutional division fell. Home lending activity was relatively muted, with the bank boosting the size of its mortgage book by only 1 per cent. “Growing our SME franchise remains a priority and over the June quarter SME business lending rose four per cent,” McEwan said. “During the same period, we chose to maintain our disciplined approach in the competitive Australian home lending market with below system growth of one per cent.” The NAB boss attributed the decline in net interest margin to price competition for deposits and home loans. A major theme in NAB’s public messaging since McEwan took the reins in 2019 has been a concerted program to raise productivity across the group’s myriad of businesses. Historically, the bank has been known as a Byzantine bureaucracy – a reputation that McEwan indicated in 2019 he wanted to demolish. At the moment, the bank is restructuring a range of business units to drive efficiency improvements. The latest business unit facing an overhaul is the private wealth operation where 50 staff are set to be made redundant. The overhaul of private wealth comes as the group is also realigning the way its branches operate in the distribution of personal banking services. The personal banking overhaul is expected to take effect in late September. “Our strategy is also delivering productivity, which is key to helping us manage inflationary impacts while still investing in our key priorities,” McEwan said. “We continue to target productivity savings of approximately $400 million in FY23.” Productivity