Shares in National Australia Bank have fallen more than three per cent, despite the lender announcing an almost $6 billion cash profit.
National Australia Bank (NAB) made a full year cash profit of $5.94 billion for the 12 months to September 30, up 9.3 per cent on its $5.4 billion profit the previous year.
Cash profit is a measure banks use to reflect underlying performance.
The bank’s net profit, which includes one-off financial items, was $5.45 billion, up 33.6 per cent from $4.08 billion the year before.
Shares in NAB were down $1.13, or more than three per cent, to $35.10.
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Morningstar analyst David Ellis said that while the profit figure was in line with expectations, the details of the result were less impressive.
He said the improvement in profit was mostly due to a fall in bad debts and earnings growth hadn’t been as strong as expected.
“National Australia Bank (NAB) delivered a solid all-round performance … pretty much in line with consensus,” he said.
“But earnings quality was not as good as expected with cash earnings for the wide moat major bank boosted by a sharp fall in bad debts,” he said.
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NAB chief executive Cameron Clyne said the result reflected an improved performance across most areas of the business.
“The group’s full year results show an improved performance across most business units, combined with solid progress against our simplification and digitisation agenda,” he said.
The bank increased its net revenue two per cent, to $18.58 billion, during the year while its group net interest margin fell nine basis points to 2.02 per cent.
The total charge for bad and doubtful debts was $1.93 billion, down $681 million compared to the previous year thanks to improved asset quality trends, particularly in NAB’s UK business and its business banking division.
“Some improvement in the UK operating environment and initiatives to reduce the Australian risk profile have supported a lower charge for bad and doubtful debts,” Clyne said.
Operating expenses were contained at 1.9 per cent, excluding the one-off costs relating to the restructure of the bank’s Australian business.
NAB announced a fully-franked final dividend of 97 cents, an increase of seven cents compared to a year ago.
