National Australia earnings climb as bad debts fall

National Australia Bank, the nation's biggest corporate lender, said first-half cash earnings rose 8.2 per cent after it booked lower charges for bad debts and made more money at the business and wealth-management units.

Cash earnings, which strip out hedging and integration costs, climbed to A$2.19 billion in the six months ended March 31 from A$2.03 billion a year earlier, the bank said yesterday.

The result matched analysts' estimates. After weathering the slowdown without bailouts, Australian banks including Westpac and ANZ are increasing earnings as charges for bad debts fall.

As investors question whether growth can be sustained as funding costs rise, NAB chief executive Cameron Clyne said he would rely on a recovery in business lending to drive earnings.

"Our profit in the next 18 months is coming from a rebound in business credit growth,' Clyne said. "It's not clear whether it will come in late 2010 or 2011."

There were already "early signs" of a recovery.

Chief financial officer Mark Joiner said business credit may "rebound quite strongly" in the second half and the pipeline for corporate loans was the strongest in five years.

Clyne is betting the bank's traditional dominance of the Australian business market, which weighed on earnings during the global downturn, is now in his favour as the economy improves.

The Reserve Bank this week increased the key interest rate for the sixth time since early October, to 4.5 per cent.

Earnings at the NAB's business division jumped 33 per cent to A$1.1 billion, while wealth-management profit surged 29 per cent.

National Australia Bank is the worst-performing stock this year among the country's four largest lenders, partly because the lender is trying to buy Australian asset manager Axa Axia Pacific Holdings for A$13.3 billion.

- BLOOMBERG