NAB 1H Profit Rises 11%, Increases Dividend — Update

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By Alice Uribe

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SYDNEY–National Australia Bank Ltd. reported an 11% rise in interim profit and increased its dividend after experiencing strong growth in lending and deposits.

Australia’s second largest lender by market share on Thursday said its net profit rose to A3.55 billion Australian dollars (US$2.57 billion) in the six months through March.

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“Revenue rose 4.6%, benefitting from pricing discipline and strong growth in lending and deposits which were up 10% and 12% respectively versus March 2021,” said Chief Executive Ross McEwan. “Focused investment has been key to delivering strong momentum across our businesses.”

Cash earnings–a measure closely tracked by analysts that strips out non-core items such as revenue hedges and treasury shares–rose by 4.1% to A$3.48 billion. The bank declared an interim dividend of A$0.73 per share, compared with A73 per share, compared with A$0..
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60 declared a year earlier.

NAB’s business and private banking unit’s cash earnings rose by 18% on year to A$1.42 billion, while the personal banking unit’s cash earnings fell by 8.3% to A$788 million.

Consensus forecasts compiled by FactSet projected NAB’s first-half profit would be A$3.45 billion, with an interim dividend of A$0.69 per share.

Still, NAB’s net interest margin fell 11 basis points to 1.63% compared to the same time last year, which the lender said reflected competitive pressures and mix issues in housing lending, partly offset by lower deposit and funding costs.

Australian bank NIMs have been under pressure amid the low interest rate environment which helped to drive a house price surge in Australia. This has spurred increased competition in the mortgage market between lenders, while also seeing margins squeezed.

But with the Reserve Bank of Australia on Tuesday raising its official cash rate to 0.35%, from a record-low 0.10%, some analysts say the country’s major banks may get a margin boost.

NAB’s Common Equity Tier 1 capital ratio–a key measure of a bank’s ability to withstand financial shocks–was 12.48%. This was 52 basis points lower than Sep. 2021, which the bank said reflected the impact of a now-completed A$2.5 billion on-market share buy-back.

“Our capital levels remain above our targets despite completing a A$2.5 billion buyback, with a further A$2.5 billion buyback coming in May 2022. Our fiscal 2022 term funding is also well advanced,” said Mr. McEwan.

NAB’s 1H credit impairment charges were A$2 million versus a writeback in the first half of fiscal 2021 of A$128 million.

“The 1H charge reflects increased charges for forward looking provisions combined with an underlying write-back,” said NAB.

The lender on Thursday reset its fiscal 2022 cost growth target to around 2-3%, partially in response to the current inflationary environment. NAB said this target includes costs associated with the essential work underway to deliver the requirements of its enforceable undertaking with the Australian Transaction Reports and Analysis Centre.

NAB said it was no longer targeting absolute cost reductions by fiscal years 2023-2025.

Write to Alice Uribe at [email protected]


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