Big banks cautious after quarterly earnings

The National Australia Bank says while its early cash results are promising, the higher cost of finance bit into its bottom line.

It has been a tough few months for the NAB - a computer glitch seized customers' bank accounts and it is facing a class action lawsuit from investors.

But chief executive Cameron Clyne was putting a good spin on things at an investor briefing today.

"We've maintained momentum in our core businesses, we've performed well relative to our peers in all of our markets," he said.

"We have a strong balance sheet that is well able to handle the impact of Basel III proposals and take advantage of higher system grades and we positioned the bank exceptionally well to absorb political intervention."

Unaudited cash profit for the December quarter came in at $1.3 billion, up 18 per cent from the same time last year.

The bank increased its mortgage and business lending and bad debts fell slightly to $493 million. That includes a $25 million charge for the floods in Queensland in December.

Mr Clyne says the impact from the latest floods is still to come.

"The operating environment does continue to be uncertain. The global economy is clearly improving but there's ongoing sovereign concerns in Europe and there's new uncertainties emerging with civil unrest in the Middle East," he said.

"There has to be some caution given the potential impact of the floods in Queensland, New South Wales, Victoria and the cyclone in north Queensland and what impact this will have on the Australian economy."

Profit downgrade

Meanwhile, investment bank Macquarie Group has downgraded its profit forecast for the second half of the year.

It says markets are starting to return to normal even though Wall Street has reached the highest levels since June 2008.

Chief executive Nicholas Moore says trading volumes are low and that has hit its stockbroking arm, Macquarie Securities Group.

"I don't think we're saying what a normal level is, we're just saying that where we are doesn't feel like normal, that actually we are clearly at subdued levels and we do see volume stepping up, and inevitably as the cycle moves we expect that pendulum to swing back," he said.

Macquarie has businesses around the world from stockbroking and investment management.

Mr Moore expects profit for the second half of the year to drop by 5 per cent from the same time last year.

That could see it fall short of last year's $1 billion annual profit.

"In terms of the outlook for the rest of the second half, you recall the half-year announcement, we said that subject to market positions returning to more normal levels, it was anticipated that the full-year result would be broadly in line with last year," he said.

"We currently anticipate the second-half result to be approximately up 35 per cent on the first half, which would mean it would be about 5 per cent down on the same period last year."

The banks says they face challenges, including tougher regulations. They have warned again about the impact of having to have bigger capital reserves on their books.

But the global financial crisis did not dampen the appetite of bank executives for high salaries. Macquarie says its compensation this year will be at historical levels.

The Commonwealth Bank will unveil its annual profit on Wednesday.