The major bank has reported third quarter profit growth, despite rising regulatory costs, and a “challenging operating environment”.
In its 2018 third quarter (3Q18) trading update, released yesterday (14 August), NAB revealed that its statutory net profit increased by $50 million when compared with the previous corresponding period (pcp), from $1.6 billion in 3Q17, to $1.65 billion in 3Q18.
NAB’s revenue also increased by 1 per cent, which the bank attributed to “good growth in SME lending” and a “strong contribution” from its banking division in New Zealand.
However, the bank’s cash earnings fell by 1 per cent quarter-on-quarter, and by 3 per cent from the pcp, to $1.65 billion.
The bank’s net interest margin also dropped, which it said reflected “elevated short-term wholesale funding costs and “intense home loan competition”.
Further, NAB’s expenses rose 2 per cent in 3Q18, which it attributed to “higher compliance costs, investment spend consistent with the accelerated strategy, and increased depreciation and amortisation”.
NAB CEO Andrew Thorburn said that he is satisfied with the bank’s performance amid a “challenging operating environment”, and made particular reference to the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry’s ongoing investigation into the group’s practices.
“Notwithstanding a challenging operating environment, financial performance in 3Q18 has been sound,” he said.
“Revenue is up, despite elevated short-term wholesale funding costs, while asset quality and balance sheet metrics remain strong.
“As we make progress towards resolving several previously disclosed regulatory compliance investigations, we expect to recognise additional provisions in the 2H18 result, noting there are significant uncertainties in determining a provisioning outcome at this time.
"These additional costs will be excluded from the expense growth guidance of 5-8 per cent for FY18."
Mr Thorburn also said that NAB is working to address failings identified by the royal commission, acknowledging that the group has “let customers down”.
“The royal commission is challenging us with its focus on where we have let customers down,” he added.
“We are determined to respond and become a better bank through living our purpose and values every day.”