The National Australia Bank Ltd (ASX: NAB) share price will be on watch today.
That's because the big four bank has just released its first quarter update.
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NAB share price on watch following Q1 update
- Unaudited statutory profit of $1.7 billion
- Unaudited cash earnings down 16.9% to $1.8 billion
- Group CET1 ratio of 12%
What happened during the quarter?
For the three months ended 31 December, NAB reported cash earnings of $1.8 billion, which represents a 16.9% decline compared to the prior corresponding period.
However, compared with the second half quarterly average, NAB's cash earnings before tax and credit impairment charges were broadly stable.
Management advised that this reflects a 1% increase in revenue, driven by Markets & Treasury (M&T) income. Excluding M&T, revenue was broadly flat with lower margins offset by volume growth.
The bank's net interest margin (NIM) was slightly higher. Though, once again this was due to M&T. Excluding it, NAB's NIM declined modestly with higher deposit costs and competitive lending pressures, partly offset by higher earnings on capital.
NAB's expenses rose 2% over the second half average, reflecting higher performance-based compensation and leave provisions, higher technology costs, and investment in financial crime capability. This was partly offset by productivity.
For FY 2024, management continues to target productivity savings of approximately $400 million and for expense growth to be lower than FY 2023 growth of 5.6%.
How does this compare to expectations?
The good news for the NAB share price today is that this result appears to have come in ahead of expectations.
The consensus estimate was for cash earnings of $1.73 billion, whereas NAB reported cash earnings of $1.8 billion.
Management commentary
NAB's CEO, Ross McEwan, was pleased with the quarter. He said:
We have started FY24 well. Our 1Q24 financial performance is sound and there is good, targeted momentum across our bank. Over the December quarter lending balances rose 1%. This includes 2% growth in Australian SME business lending and 1% growth in Australian home lending. Customer deposit balance growth of 2% across both Business & Private Banking and Personal Banking is also pleasing.
1Q24 cash earnings declined 3% compared with the 2H23 quarterly average but were broadly stable excluding the impact of a higher effective tax rate of 30%. This reflects a continued disciplined approach to growth during what remained a highly competitive period, combined with a focus on productivity to help offset cost pressures.
