Australia's most profitable bank, National Australia Bank Ltd (NAB), announced on Thursday a sharp jump in first-quarter earnings despite stiff competition and sluggish economies at home and abroad.
The annual meeting in Melbourne was told that net profit for the three months to December 31 jumped 13.5 per cent to A$582 million, largely underpinned by lower costs and fewer bad debts.
"That will be one of the best first quarters that you will find in the banking system," NAB managing director Don Argus told told reporters after the meeting.
Stock analysts agreed.
"We think this was a very good, strong, durable result," BT Securities banking analyst Andrew Leeming said.
NAB bucked a trend in the banking industry by keeping interest margins stable in the first quarter, but Argus said he expected competitive pressures to squeeze margins further.
"You're in a competitive game and I would expect that they will contract a little more yet," he said.
Australia's banks are locked in a price war for the nation's home borrowers, tripping over each other to attract new customers with discount rates.
Some have more than passed on the three official rate cuts made by the central bank since last July.
Two of Australia's other big four banks, Westpac Banking Group Ltd and Australia and New Zealand Banking Group Ltd (ANZ), have told their shareholders this month that their first-quarter earnings were on track, but gave no details.
NAB, Westpac and ANZ all close their books on September 30. The fourth big bank, the Commonwealth Bank of Australia, rules off its year on June 30.
NAB, which has offshore operations in Britain, the United States and New Zealand, wrote off A$39 million in bad debts in the quarter, a third less than for the same quarter a year ago.
The bank also boasted of lowering its costs as a percentage of income, to 53.3 per cent in the first quarter, and said it planned to take this down toward 40 per cent by the year 2000.
Despite the bullish result, NAB executives were in no mood to clear up speculation the bank was poised to swallow one of its rivals if Canberra gave its approval for big bank mergers.
The government is awaiting the outcome of an official inquiry into Australia's financial system before deciding the fate of its long-standing freeze on such mergers. But NAB chairman William Irvine hinted at a new banking landscape.
"Obviously, we can't foreshadow any acquisition or merger, but life may become interesting after the Wallis committee (of inquiry) comes out with its recommendations," Irvine told the annual meeting, his last before retiring from the board.
Investors cheered NAB's first-quarter result, sending the bank's shares sharply higher in a weak stock market. The stock was trading 45 cents higher at A$15.46 shortly before the close.