National Australia Bank Ltd (OTC:NABZY) shares declined 8% in early trading after the bank reported a 3% fall in cash earnings for the December quarter, reflecting rising expenses, increasing arrears and weakening margins over the period.
For the quarter ending December 31, the lender’s unaudited cash earnings stood at A$1.74 billion, down 3% year-on-year, while net profit remained steady at A$1.7 billion.
The bank noted a “small decline in net interest margin” due to pressures from funding costs, competition in lending and deposit trends.
Following this morning’s reporting, NAB shares dropped 8.4% to A$36.21. It had made up some ground by midday, down 6.05% to be trading at $37.12.
The broader banking sector also felt the impact, with Westpac and Bendigo Bank reporting margin compression. Westpac’s net interest margin declined to 1.81% in the first quarter while Bendigo Bank’s margin dropped 6% to 1.88% in the first half.
Partial offsets to blame
NAB did not disclose the exact extent of its margin contraction but pointed to partial offsets from the benefits of higher interest rates and positive contributions from its markets and treasury business.
Meanwhile, arrears increased by 4 basis points to 1.43%, influenced by worsening conditions in business and private banking and rising home loan delinquencies.
Chief executive Andrew Irvine maintained a positive outlook while acknowledging economic pressures. “We have started fiscal 2025 well. Our first quarter performance is sound and execution of our refreshed strategy is underway,” he said.
He added that while the economic outlook was improving, cost-of-living pressures and interest rate challenges remained. “While most customers are proving resilient, we have maintained prudent balance sheet settings to allow us to support customers while keeping our bank safe.”
Deposits grew 2% over the three months, while home lending increased 1%, trailing the system. Higher credit impairment charges of A$267 million and increased income tax expenses offset 4% underlying profit growth, the bank reported.
Revenue rose 3%, driven by stronger markets and treasury income, but expenses also climbed 2%, primarily due to personnel costs, financial crime compliance and higher technology investment. NAB last traded at A$39.51.