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National Australia Bank’s earnings went into reverse, if only slightly, during the December quarter as a 5 per cent rise in expenses ate into profits.

In its quarterly trading update, the Australian lender reported cash earnings (a preferred measure in Australia) of A$1.6bn ($1.2bn) in the three months ended December 31, which was down 1 per cent from a year earlier and also the September quarter.

NAB said its charge for bad and doubtful debts declined by 23 per cent in the quarter to A$164m. Its Common Equity Tier 1 capital ratio fell to 9.5 per cent as of December 31 from 9.8 per cent on September 30, which is still just above its targeted range. But the bank flagged the possibility of issuing an ASX-listed hybrid security, subject to market conditions, to help maintain a strong capital position.

Shares in NAB were the best performer among Australia’s major banks on Monday, up 1.5 per cent in Monday morning trade in Sydney at A$30.82, having risen as much as 2.1 per cent.

Australian bank shares have, as a group, sold off by almost 6 per cent since hitting a one-and-a-half-year high in January. NAB’s share price bounce today provides some respite after that decline and follows Friday’s positive session on Wall Street that has pushed Australia’s benchmark S&P/ASX 200 index 0.4 per cent higher today.

NAB is one of the three out of four main Australian banks to have an end-of-September balance date and so provides a trading update during the February domestic reporting season.

Copyright The Financial Times Limited 2017. All rights reserved.
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