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Saturday 19

August, 201712:24 AM



NAB lifts Q3 profit 5% after rate hikes

NAB lifts Q3 profit 5% after rate hikes

National Australia Bank has lifted third-quarter cash profit five per cent to $1.7 billion, largely thanks to its higher mortgage rates.

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By AAP 11.08.2017 03:01 PM

National Australia Bank's mortgage rate hikes have helped the lender lift third-quarter cash profit five per cent to $1.7 billion.

NAB on Friday said revenue for the three months to June 30 rose two per cent, helped by a higher net interest margin resulting from loan repricing and what it said were more favourable funding conditions.

The bank in March lifted its standard variable mortgage rates for both owner-occupiers and investors, citing elevated funding costs.

Friday's trading update was based on unaudited figures.

Bad and doubtful debt charges fell 12 per cent over the quarter to $173 million, down 24 per cent on the same period a year ago.

The ratio of loans 90 or more days overdue and gross impaired assets declined 0.05 percentage points to 0.80 per cent - flat on a year ago - which NAB said mainly reflected improved conditions for New Zealand dairy customers.

"Cash earnings and revenue are both higher, asset quality has improved and our capital and funding positions remain sound," NAB chief executive Andrew Thorburn said.

NAB said its tier one capital ratio dropped from 10.1 per cent in March to 9.7 per cent, but that it would comfortably meet the 10.5 per cent target for January 2020 laid out by the Australian Prudential Regulation Authority.

The bank lifted standard variable mortgage rates for owner-occupiers and investors on March 24 after the US Federal Reserve lifted its key interest rate, drawing criticising including from Prime Minister Malcolm Turnbull.

It then trimmed some variable rates from June 30, but hiked variable rates for interest-only mortgages in line with APRA's bid to slow down riskier lending.

Those latter moves came too late to have an effect on the third quarter.

Mr Thorburn was positive about the outlook.

"The Australian and New Zealand economies remain resilient with solid growth supported by strong population growth and low unemployment," Mr Thorburn said.

"However, the household sector faces some challenges with high levels of household debt, muted wages growth and subdued consumer sentiment."

Nonetheless, UBS cut its 12-month target price for NAB from $30 to $27.50, revising down its full-year cash profit forecast by 0.3 per cent to $6.64 billion on the back of higher costs.

At 1500 AEST, NAB shares were down 42 cents, or 1.4 per cent, at $30.06 amid a market-wide selloff.

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