* NAB posts A$1.55 bln Q1 cash profit
* Bad debts fall 23 pct
* UK compensation outlook "uncertain"
(Adds detail on bad debt reduction, UK business)
By Byron Kaye
SYDNEY, Feb 21 National Australia Bank Ltd
, the country's top lender by assets, on Friday posted
record first-quarter cash earnings as bad debts fell, but warned
it was uncertain about the fallout from an overcharging error in
its U.K. business.
NAB said unaudited cash profit rose 7 percent to A$1.55
billion ($1.39 billion) for the three months to December 31,
compared with A$1.45 billion a year ago.
Cash profits, which exclude one-offs, non-cash accounting
items and investment gains or losses, are closely watched by
NAB shares fell more than 2 percent in opening trades.
The result continues the strong run by Australia's four
major banks, which analysts expect to post a sixth consecutive
year of record combined profits as loans grow and bad debts
shrink thanks to record low interest rates.
NAB said bad and doubtful debt charges fell 23 percent to
A$324 million in the quarter.
On Feb. 12, Commonwealth Bank of Australia, the
country's biggest lender by market value, said impaired loans
fell 26 percent. A day earlier, Australia and New Zealand
Banking Group Ltd forecast a 10 percent fall in annual
bad debt exposure.
Westpac Banking Corp reports half-year earnings in
The flipside to the booming loan demand is intensifying
competition, which banks say is resulting in margin pressure.
NAB said margin pressure and the impact of falling interest
rates on capital saw revenue grow by just 1 percent in the
The bank's U.K.-based Clydesdale Bank has been compensating
customers after discovering in April 2009 it had miscalculated
repayments on 42,500 mortgages.
NAB said the customer redress costs were negligible in the
quarter, but said UK regulators were taking an active stance on
NAB's management of the situation and complaints had grown.
"There remains a wide range of uncertain factors relevant to
determining the total costs associated with conduct-related
matters," NAB said in a statement to the Australian Stock
"The risk that additional provisions will be required for
U.K. conduct related matters has increased since the 2013
full-year results and a full assessment of related provisions
will be made... as part of the finalisation of the 31 March 2014
($1 = 1.1134 Australian dollars)
(Reporting By Byron Kaye; Editing by John Mair)