NAB profit meets the mark amid business lending growth

National Australia Bank’s profit was in line with analyst expectations, supported by strength in its flagship business lending unit.

Cash earnings dipped to $7.1 billion in the 12 months ended September 30, from $7.7b in the previous year, the bank said in a statement Thursday. That compared with the $7.06b average estimate in a Bloomberg survey of analysts.

“Despite headwinds, Australia’s economy is in reasonable shape and we are optimistic about the longer-term outlook for Australia,” chief executive Andrew Irvine said.

Lending to enterprises has become a profitable endeavour for Australia’s biggest banks at a tough time for making money from home loans due to years of fierce competition. Investors are also scrutinising bank spending plans with expectations that lower interest rates next year in Australia could further pressure margins.

The bank said it saw a deterioration in asset quality over the year as the number of troubled loans ticked up, albeit only marginally, echoing signals from all the country’s major banks that bad debts remain in check.

NAB boosted the level of loans backed by deposits and added to its cushion for write-offs, keeping both higher than before the pandemic. That reflects “uncertainty over the impact of global instability” as well as “the ability of customers to manage high interest rates and inflationary pressures,” according to the statement.

The business and private banking division, its largest, saw revenue benefiting from volume growth and higher foreign-exchange income. Margins there were lower, due in part to competitive lending pressures.

Meanwhile, the firm’s personal banking unit took a hit from the impact of competition in mortgages that curbed margins.

NAB share are up 28 per cent this year.

Bloomberg