NAB Fiscal Year Profit Up 7.6%, Raises Dividend -- Update

By Alice Uribe

SYDNEY--National Australia Bank said increased lending and deposits in its business-related divisions helped to drive a 7.6% increase in its annual profit and an almost 8% improvement in its dividend.

The bank said net profit for the 12 months through September rose to 7.41 billion Australian dollars (US$4.74 billion). Analysts had expected a full-year net profit of A$7.71 billion, according to FactSet's consensus estimate.

Cash earnings--a profitability measure tracked closely by analysts--rose by 8.8% to A$7.73 billion.

Still, Chief Executive Ross McEwan said challenges in the operating environment became more evident as fiscal 2023 progressed, reflecting the impacts of monetary policy tightening and inflationary pressures on households and the economy.

This had led to its financial results softening in the second half of the period, compared to the previous six months. "While the economic transition has further to go, we are well placed to navigate this environment," McEwan said. "We continue to see attractive growth options and productivity is helping us manage inflationary pressures."

NAB's annual operating expenses rose 9.1% to A$9.02 billion, partly due to higher personnel costs and continued investment in technology and compliance capabilities, the lender said.

At a divisional level, the Corporate and Institutional banking unit's annual cash earnings rose by 15% to A$1.87 billion, while the Business and Private Banking unit's cash earnings rose by 10% to A$3.32 billion. Still, NAB's Personal Banking unit's cash earnings fell by 9.1% to A$1.45 billion.

NAB's net interest margin--the difference between the interest income generated and the amount of interest paid out to lenders--rose 9 basis points to 1.74%, and on an adjusted basis it rose 14 basis points.

The lender said this reflected higher earnings on deposits and capital as a result of the rising interest rate environment, partially offset by mortgage competition, deposit mix and higher wholesale funding costs.

NAB, like other lenders, has benefited from the rising interest rate environment. The Reserve Bank of Australia this week raised its official cash rate by 25 basis points to 4.35%, marking the first hike since July, following the news of higher-than-expected inflation in the third quarter.

But the lender said the benefits of higher rates through FY 2023 had been increasingly offset by competition and inflationary pressures in the second half of the year. Some analysts believe that Australian lenders may soon see limited earnings growth, with the rates tailwind for net interest margin and earnings likely to slow into FY 2024 and beyond.

NAB said with inflation moderating, the cash rate looked to be at or near peak levels.

"The extent to which households continue to adjust to cost of living pressures and higher interest rates and the timeframe over which inflation softens remain key to the outlook including the path of monetary policy," NAB said.

For fiscal 2023 the ratio of 90+ days past due and gross impaired assets to gross loans and acceptances increased by 9 bps to 0.75%, which NAB said was driven by higher delinquencies across the home loan and business lending portfolios.

Directors of the company raised the final dividend to A$0.84 per share, compared with A$0.78 a year ago, while the group's Common Equity Tier 1 capital ratio was 12.22% at the end of September, compared with 11.51% the previous year.

Write to Alice Uribe at [e-mail]

(END) Dow Jones Newswires

November 08, 2023 17:05 ET (22:05 GMT)

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