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NAB profit "solid"

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National Australia Bank has grown its cash profit in the first quarter by seven per cent to $1.55 billion.

Net profit, which includes one-off items, was about $1.4 billion, the bank said.

The main difference between statutory and cash earnings related to the elimination of treasury shares and the effects of fair value and hedge ineffectiveness, the bank said.

Revenue increased by 1.0 per cent.

Higher lending balances were being partly offset by lower customer margins which, the bank said, reflected increased competition between the banks.

The bank’s net interest margin – a measure of the profitability of its loans – was being hurt by higher holdings of liquid assets and the effect of falling interest rates on capital.

Expenses rose 3.0 per cent over the period, with much of that due to adverse foreign exchange rate movements.

National Australia Bank chief executive Cameron Clyne said it was a solid first quarter result that continued trends of improvement in asset quality and good growth in mortgages.

Charges for bad and doubtful debts were down 23 per cent to $324 million due primarily to lower charges in Australian banking and in the UK businesses.

However, Clyne said, the bank had faced an increased number of complaints, settlements and possible higher claims relating to its Clydesdale and Yorkshire banks in the UK.

British regulators are investigating bank misconduct, related to the mis-selling of financial products including loans and insurance.

“Regulators continue to take an active stance in our management of customer claims, including for payment protection insurance and interest rate hedging products,” he said.

“Accordingly, the risk that additional provisions will be required for UK conduct related matters has increased since the 2013 full year results and a full assessment of related provisions will be made.”

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