National Australia Bank has told shareholders their dividends won't be affected by the $4.2 billion hit it took by disposing of Clydesdale Bank.
NAB on Tuesday confirmed the size of the loss from this month's partial demerger and IPO of its underperforming UK business, but said it will not have any impact on dividends because it won't be included in the company's first half cash earnings set be announced on May 5.
The loss will instead be logged under discontinued operations in its statutory report.
NAB paid out 71.5 per cent of first half cash earnings in 2015, handing shareholders an interim dividend of 99 cents per security, and looks well placed to improve on first half cash earnings of $3.44 billion.
It reported an eight per cent increase over the first quarter to $1.65 billion.
"Our performance in the first quarter demonstrates continued momentum across our Australian business," chief executive Andrew Thorburn said.
"In our core business, investment in priority segments is delivering improving results. This is particularly the case in Australian banking, which this period recorded improved revenue growth on higher volumes and stronger margins."
Commonwealth Bank, which reports on a different schedule to NAB, has already held its interim dividend steady at $1.98 after lifting first half cash earnings 3.92 per cent.
NAB's unaudited earnings update for the three months to December 31, which excluded Clydesdale, showed a two per cent increase in revenue.
That came on the back of increased lending volumes and a higher net interest margin - the profit a bank makes on its loans - following its out-of-cycle hikes to its standard variable mortgage rates late last year.
That was partially offset by increased funding costs and competition for business lending.
NAB lifted its standard variable mortgage rates by 0.17 percentage points to 5.6 per cent in November.
The charge for bad and doubtful debts more than halved to $84 million, but expenses rose five per cent on salary increases and redundancy costs, while credit quality slipped five basis points over the quarter to 0.68 per cent.
"The bad and doubtful debts continues to fall. Whether that's sustainable or not remains to be seen," optionsXpress analyst Ben Le Brun said.
"It's a finite way of improving your bottom line, albeit a legitimate one."
First half statutory net profit, which includes one-off items excluded in cash earnings, fell 17 per cent to $1.5 billion from $1.8 billion.
NAB shares gained 1.8 per cent in early trade but had trimmed those gains to close 23 cents, or 0.93 per cent two cents higher at $24.98.
NAB'S FIRST QUARTER NUMBERS
* Cash earnings up 8pct to $1.65bn
* Net profit down 17pct to $1.5bn
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