February 7, 2018 / 10:06 PM / a year ago

UPDATE 2-National Australia Bank Q1 profit rises after debt charges decline

* NAB posts lowest quarterly bad debt charge since 1Q 2016

* Revenues 1 pct higher while margins fall

* Shares move higher amid slight falls in wider market (Adds share price, bad debt charge detail)

By Paulina Duran

SYDNEY, Feb 8 (Reuters) - National Australia Bank Ltd on Thursday reported a 3 percent rise in first-quarter unaudited cash profit, driven by the lowest quarterly bad debt charge in two years which helped offset subdued revenues.

Australia’s fourth-biggest bank by market value posted unaudited cash earnings of A$1.65 billion ($1.29 billion) for the three months ended Dec. 31, in line with a Morgan Stanley estimate of about A$1.7 billion.

The quarterly result was boosted by a 23 percent decrease in bad and doubtful debts to A$160 million, representing the lowest bad debt charge since the quarter ended December 2015, NAB said.

The drop was largely driven by the absence of a top-up of its so-called “collective provision”, which is used as a buffer against potential losses in the bank from system risks. It had increased it by A$249 million last financial year to protect itself from a slowdown in the property market.

NAB’s shares were 2.6 percent higher at A$28.9 at noon, while the broader market was slightly weaker.

Australia’s four major banks have logged record profits for years, but regulations targeting a property bubble have choked growth prospects.

A series of scandals also have cost the banks hundreds of millions of dollars in fines and forced the government to order a powerful inquiry into the sector that is due to start next week.

The banks have rushed to build up their capital coffers after the regulator last year asked them to raise their Tier 1 capital ratios to 10.5 percent by 2020 to protect against financial shocks.

Despite a small increase in its CET1 ratio during the quarter to 10.2 percent at Dec. 31, Melbourne-based NAB is running behind its three main rivals - Commonwealth Bank of Australia, Australia and New Zealand Banking Group and Westpac Banking Corp. - to meet the regulatory requirement.

NAB said on Thursday is was on track to meet cost savings of more than A$1 billion by 2020 by reducing its net head count by 4,000 and replacing staff with improved technology.

The bank said expenses for the first quarter in 2018 rose 4 percent due to higher investment spending, while revenue edged up 1 percent.

Net interest margin declined during the period.

$1 = 1.2788 Australian dollars Reporting by Paulina Duran in Sydney. Additional reporting by Shashwat Pradhan in Bengaluru; Editing by Stephen Coates

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