National Australia Bank has lifted first-half cash earnings 6.5 per cent to $3.31 billion, emerging from the disposal of its unprofitable UK business with the best results of the big four banks.
A previously flagged $4.22 billion hit from the demerger and float of Clydesdale Bank dragged NAB to a statutory $1.74 billion loss for the six months to March 31, but cash earnings - the banks' preferred measure of profitability - were up strongly.
The result was the strongest of Australia's big four and came on the back of a one basis point lift in net interest margin and a reduction in the cost of bad loans.
"This is our first result squarely focused on our Australian and New Zealand business," chief executive Andrew Thorburn said in a statement on Thursday.
"It shows that delivering against our strategic priorities is producing results and laying the foundations for sustainable growth and returns."
Cash earnings from Australian banking were up 5.0 per cent to $2.69 billion, while those from wealth management were up 11.7 per cent to $249 million.
NAB kept its interim dividend unchanged at a fully franked 99 cents per share.
Chief financial officer Gary Lennon said the bank considered the dividend sustainable but that it aims to get the payout ratio down from 78.8 per cent of cash earnings to within its 70-75 per cent target range.
"It's the best of the three major banks to report so far," CMC Markets chief market strategist Michael McCarthy said.
"This is a good report from a bank that is in transition from the worst performer of the big four and heading up the list."
CLSA banking analyst Brian Johnston called it "a cracker of a result".
Westpac this week lifted first-half cash earnings a below-expectations 3.3 per cent to $3.904 billion, while ANZ reported a 24.3 per cent drop to $2.782 billion, its lowest since 2010.
Commonwealth Bank reported in February, lifting cash earnings 3.9 per cent to $4.80 billion for the six months to December 31.
While Westpac and ANZ both increased their provision for bad debts, NAB's bad debt charge dropped six per cent on the prior corresponding period to $375 million.
NAB, which on Tuesday committed to passing on the Reserve Bank's 25 basis point cash rate cut in full to its mortgage holders, said personal banking revenue growth was up two per cent despite higher wholesale funding costs and a slowing in home lending growth.
NAB shares gained as much as 4.1 per cent before falling back to $27.91 at 1556 AEST.
NAB'S FIRST-HALF NUMBERS
* Net loss of $1.74 billion vs $3.440 billion profit
* Cash earnings up 6.5pct to $3.107 billion
* Interim dividend unchanged at 99 cents, fully franked
