National Australia Bank Ltd. reports: Here's what you need to know

National Australia Bank Ltd. (ASX:NAB) has delivered its first quarter results: How do they look?

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What: National Australia Bank Ltd. (ASX: NAB) has released its first quarter trading update to the market this morning, announcing a 6% increase in unaudited cash earnings to $1.65 billion. Meanwhile, the bank's net profit hit $1.8 billion which compares to the $1.4 billion recorded last year.

Despite the increase, the results were not well received by the market which sold the stock down 1.1% to $36.10.

So What: The major bank's profit continued to rise over the first quarter as a result of stronger income from markets, improved business lending volumes and growing home loans. It said that home lending grew at 1.4x system over the quarter and 0.9x system for business lending growth.

National Australia Bank is Australia's largest business lender and thus stands to benefit from an expected pick-up in business credit growth, however, other banks are also aiming to capitalise on the opportunity. As a result, a rise in business lending competition weighed on the bank's net interest margin (the profit it makes on its loans) over the quarter.

Meanwhile, bad debt charges also rose 30% in the quarter to $227 million, although the bank said this was stable when certain one-time items (including provisions for the UK commercial real estate portfolio) were excluded. These charges should remain low for the foreseeable future, particularly after the RBA decided to slash interest rates to a record-low of 2.25% earlier in the week.

National Australia Bank also took the opportunity to announce it would cut the interest rate on its standard variable rate by 25 basis points, passing on the full amount of the Reserve Bank's rate cut to customers. While Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have already cut their rates, the pressure will be on Australia and New Zealand Banking Group (ASX: ANZ) to do the same.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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