(Feb 19): National Australia Bank, the country's biggest business lender, said first-quarter profit slipped as competition for customers ate into margins and more borrowers fell behind on repayments, sending its shares tumbling.

NAB said its bad exposures ticked up during the quarter as business segment's lending portfolio deteriorated while late home loan payments rose as Australians struggled with high living costs.

"The economic outlook is improving but cost of living and interest rate challenges persisted during 1Q25," chief executive officer Andrew Irvine said.

The lender posted cash earnings of A$1.74 billion (US$1.11 billion or RM4.9 billion) for the quarter ending December 31, marginally behind the Visible Alpha consensus estimate of A$1.77 billion, as per Citi.

That was lower than the A$1.80 billion cash earnings it reported a year ago.

Shares of the bank fell sharply in early trading, and were down 7% at A$36.76, its lowest level since December 23.

"Non-performing loan trends and mortgage arrears look slightly worse than peers," Citi analysts wrote in a note.

"NAB's balance sheet mix skewed towards business potentially leaves it more exposed to heightened deposit & funding competition in that area of the market."

The bank's net interest margin — a key measure of profitability — declined modestly during the quarter due to higher funding costs and competition, which negated the benefits of high interest rates that traditionally help banks.

Expenses during the quarter rose 2% mainly due to higher personnel and financial crime-related costs, along with increased technology spend.

NAB continues to target fiscal 2025 operating expense growth to be lower than the prior fiscal's 4.5% growth, as well as productivity savings of over A$400 million in the year, it said.

The bank's common equity tier 1 ratio — a closely watched measure of its spare cash — fell to 11.6% as of December-end, compared with 12.4% at the end of September.

Credit impairment charges rose to A$267 million during the quarter, a 38% jump from last year.

Uploaded by Magessan Varatharaja