National Australia Bank Ltd NIM subdued but Australia’s largest retail super fund is created

NIM subdued but Australia’s largest retail super fund is created: National Australia Bank Ltd (ASX: NAB) reported a 3% fall in unaudited cash earnings for continuing operations to about $1.6 billion for the third quarter 2016 against corresponding period 2015. The revenue is flat for the quarter as the growth in lending is offset by a lower net interest margin. The group NIM, excluding the impact of Markets and Treasury, was slightly lower due to higher funding costs. The Group’s Common Equity Tier 1 (CET1) ratio was 9.5% at 30 June 2016, against 9.7% at 31 March 2016 mainly reflecting the impact of the interim 2016 dividend declaration. Moreover, NAB had a higher funding costs during the quarter as the bank did not pass on all of the most recent RBA interest rate cut to home loan borrowers. However, the bank’s asset quality remains strong and cost control was effective. Additionally, the branch rollout from the Personal Banking Origination Platform has now been completed in every state except New South Wales, which recently started. NAB’s initiative NAB Labs are supporting the small business sector including NAB QuickBiz loans, NAB Business Start-up and new digital marketplace Proquo in partnership with Telstra. In addition, the sale of 80% of the life insurance business to Nippon Life will be completed during the second half of calendar year 2016. This comes post the merger of five super funds to create Australia’s largest retail super fund with approximately $70 billion in funds under management. Moody’s Investors rating has reaffirmed NAB’s rating with NAB’s senior unsecured debt unchanged at Aa2.

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