NAB's full-year profits will also be dragged down by the bank booking up to ₤500 million ($1.05 billion) in provisions relating to misconduct in its British arm – though this will come from money that has already been set aside for that purpose. In contrast to a soft update from ANZ last week, NAB's trading update said charges for bad and doubtful debts fell 15 per cent to $193 million in the quarter. CBA equities analyst Victor German said the information provided by NAB did not point to an industry-wide lift in bad debts. "NAB is the biggest SME [small-to-medium enterprise] lender in the country, and their credit-quality metrics have actually improved in the quarter," Mr German said. "I think a lot of the concerns that we've seen with ANZ could be due to a deterioration within a small part of their book or could be specific to ANZ, but it does not seem to be a material sector issue at the moment." The managing director of White Funds Management, Angus Gluskie, said the NAB data suggested bad debts were "under control at this stage". "It gives people a level of comfort," he said. NAB's revenue rose 4 per cent in its third quarter, while expenses grew a similar amount. After accounting for several one-off gains, revenue growth was 2 per cent, a sign of the softer environment facing banks. "It tells us that although the growth has slowed from high rates of the past few years, there still is a level of growth and it's not as though the banks are experiencing negative conditions at this stage," Mr Gluskie said. NAB said stiff competition had led to a decline in its net interest margin – a gauge of how much banks are paying for funds compared with what they charge for loans. Margins have been crunched as lenders fight to win loan customers, a key reason bank profit growth is expected to grow more slowly. Since NAB chief executive Andrew Thorburn began in the job in August 2014, he has put a key focus on selling its overseas "legacy" businesses in Britain and the United States, and investing in Australia. Mr Thorburn said the bank was making "substantial progress" with its plan to spin off up to 80 per cent of its British arm to shareholders and sell the rest to big investors, and it would provide more detail at its full-year results in October. "We continue to make good progress addressing our legacy and low-returning assets to enable greater focus on building a stronger Australian and New Zealand business," Mr Thorburn said in a statement. At its full-year results, NAB said it expected to book additional provision charges of up to ₤500 million ($1.05 billion), of which ₤290 million to ₤420 million relates to the mis-selling of insurance products, and ₤60 million to ₤80 million relates to interest rate hedging products. These costs will take a bite out of its reported earnings, analysts said, but will not affect its capital or dividends. That is because the provisions are already covered by ₤1.7 billion in capital that NAB has put aside to cover future misconduct charges against its British business, Clydesdale and Yorkshire. Nonetheless, analysts said the provisions were a negative, given that the bank has said any money from the ₤1.7 billion that is not spent on compensation would be returns to NAB. CBA's Mr German said of the provisions in Britain: "The part of the market that expected to get substantial write-backs from the ₤1.7 billion in capital would be somewhat disappointed by this development." NAB shares rose 1.5 per cent to $33.32. Clancy Yeates is a business reporter.
National Australia Bank - 3Q unaudited cash flow of AUD 1.75bn ( $ 1.3bn ) , up 9 % ) , helped by higher home and business prices ; however , net profit margins dropped due to increased market competition and weaker net income .