National Australia Bank 1Q earnings up 8% to AUD 1.7bn

National Australia Bank (NAB) - 1Q cash earnings of AUD 1.7bn ($1.2bn), up 8% YoY, and in line with market predictions.

National Australia Bank said its margins had improved and its bad debts were lower, as it reported cash earnings for the December quarter of $1.7 billion, up 8 per cent on the previous period and in line with the market's expectations. NAB shares are trading higher on Tuesday morning.

Underlying revenue rose 4 per cent on higher lending volumes, a higher net interest margin and strong performance in the wealth division, the bank said in a first-quarter trading update. NAB reported negative "jaws": its expenses rose about 5 per cent on higher staff costs. But it said expense growth for the full 2016 year would be less than the 4.1 per cent it reported in FY15.

With jittery bank investors focused on margins as financial market volatility pushes funding costs higher, NAB said its group net interest margin (NIM) had expanded - a result of the out-of-cycle interest rate rises last year. This was offset by higher funding costs and competition for business lending, NAB said, adding the rate of margin decline in the business bank is moderating.

NAB shares opened higher; they had risen by 0.8 per cent to $24.95 at 10:25am AEST, the best performer of the major banks.