NAB reported a net profit of A$1.3 billion for the six months to Mach – 51.3 per cent down on the previous corresponding period. Cash profit was $1.4 billion, which was down 51.4 per cent.
The result included several large charges, including a net $268 million increase in provisions for customer remediation, a $214 million impairment of the carrying value of NAB’s investment in MLC Life and a $1.04 billion change to the application of the software capitalisation policy.
Income: Net interest income of $6.9 billion for the half was up 1.9 per cent compared with the previous corresponding period. Other banking income fell 21.9 per cent to $1.9 billion. Net operating income was $8.6 billion – down 3.4 per cent from the previous corresponding period.
Expenses and cost to income: Operating expenses rose 1.6 per cent over the previous corresponding period to $4.1 billion. Operating expenses as a proportion of operating income rose from 47 per cent in the March half last year to 62.4 per cent in the latest half. Excluding a number of large notable items, the cost-to-income ratio was 46.7 per cent.
Impairment charge: The bank’s bad debt charge for the half was $1.16 billion – up from $449 million in the previous corresponding period. The increase was due to an $807 million increase in the forward-looking economic adjustment “due to the potential deterioration in broader macro-economic factors as a result of the COVID-19 pandemic.” The ratio of the credit impairment charge to gross loan and acceptances rose 23 basis points to 0.38 per cent.
Credit quality: Loans past due by 90 days or more rose 21.4 per cent to $3.9 billion and gross impaired assets rose 30.2 per cent to $2 billion. The ratio of loans past due 90 days or more to gross loans and acceptances rose 11 bps to 0.64 per cent.
Margin: The net interest margin fell 1 basis point to 1.78 per cent. The bank benefited from growth in business lending activity and repricing of mortgages, offset by the higher cost of deposits and competitive pressure in the housing market.
Return on equity and assets: The bank’s ROE was 4.7 per cent, down from 10.5 per cent in the previous corresponding period. On a cash basis ROE fell from 11.7 per cent to 5.3 per cent. Excluding the large notable items, ROE was 8.1 per cent. Cash earnings on average assets fell 38 bps to 0.33 per cent.
Earnings per share: EPS fell 51.7 per cent year-on-year to 44.2 cents a share.
Dividend: The bank declared an interim dividend of 30 cents a share – down from 83 cents in the September half last year and 83 cents in the Marc half last year. The dividend payout ratio was 61 per cent.
The divisions: The bank’s biggest division, business and private banking, produced a cash profit of $1.4 billion, down 5.7 per cent on the previous corresponding period. The consumer banking division’s cash profit rose 26.4 per cent to $699 million. The corporate and institutional banking division’s cash profit fell 10.2