National Australia Bank has warned it will continue to face increased funding costs and competition after first-quarter unaudited cash earnings slipped about one per cent to $1.6 billion
NAB, the first of the big four lenders to update the market during the current earnings season, on Monday said earnings were also about one per cent down on the quarterly average for the preceding half year.
"While the Australian and New Zealand economies remain resilient and continue to deliver solid growth, the operating environment has some challenges with funding costs remaining elevated and competition still intense," chief executive Andrew Thorburn said on Monday.
"We remain focused on executing against our strategic priorities to ensure we can grow in a sustainable way while managing our business responsibly for all stakeholders."
Lending growth helped lift revenue about one per cent while the net interest margin for the three months to December 31 was broadly stable.
But, NAB said, expenses rose about five per cent compared to the corresponding period, driven by salary increases and redundancy payments.
NAB said it shed the equivalent of 488 full-time jobs during the quarter.
"We are taking a disciplined approach to reshaping our business, balancing higher levels of investment with tight cost management, to become more efficient and to serve customers better," Mr Thorburn said.
"Our first-quarter expenses were impacted by the usual October 1 salary increases as well as elevated redundancy costs."
The charge for bad and doubtful debts declined 23 per cent to $164 million, while the cost of maintaining its full-year dividend at 99 cents - which lifted its payout ratio above 80 per cent - meant NAB's common equity tier one capital ratio dropped from 9.8 per cent on September 30 to 9.5 per cent.
That's still above NAB's target range of 8.75 per cent to 9.25 per cent.
