NAB grew share in the Australian mortgage market in the March half year and held share in customer deposits, but earnings in its personal banking division fell close to 10 per cent as competitive pricing pressure and a shift to lower margin fixed rates took their toll.
Instead, it was the business and private banking division that drove the bank’s profit growth in the half. The division’s cash profit was up 17.5 per cent to A$1.4 billion.
Business banking loan market share was also higher, as was deposit share. The difference was that the division was able to hold its margin and credit impairments fell.
Business and private banking NIM was 2.82 per cent – down just 1 basis point compared with the March half last year. Personal banking NIM fell from 2.05 per cent to 1.93 per cent over the same period.
The bank is keen to maintain the momentum in the business and private banking division, with plans to add more business bankers, digitise business loan applications and processing, and develop automated debt servicing tools.
In personal banking it is working on a digital “end-to-end” platform for home loans, which it hopes will increase the speed and convenience of its home loan processing and help grow share further.
Overall, NAB reported a net profit of A$3.55 billion for the six months to March – and increase of 10.7 per cent over the previous corresponding period. After adjusting for hedging, amortisation of acquired intangible assets and acquisition costs, cash earnings were up 4.1 per cent to $3.48 billion.
Net operating income rose 4.6 per cent to $8.8 billion, while operating expenses rose just 2.6 per cent to $2.9 billion.
Like ANZ chief executive Shayne Elliott on Wednesday, NAB CEO Ross McEwan has dropped a previous aim to set a ceiling for expenses.
The bank has given an undertaking to Austrac to fix its anti-money laundering systems and that will require significant investment over the next few years. And McEwan sees opportunities for the bank.
The one that is in his sights currently is Citigroup’s Australian consumer banking business. The parties agreed to a deal last year, the ACCC has said it has no objections and the Treasurer has signed off. Now they are waiting to APRA to give its blessing.
NAB gave an update on the details of the Citi acquisition yesterday. At March 31, Citi had mortgage balances of $8.8 billion, an unsecured loan portfolio (largely made up of its white label credit card business) of $3.95 billion and deposits of $9.4 billion.
It said Citi’s net profit for the 12 months to March was $170 million and the required equity to complete the transaction is $1.2 billion. It expects to spend an additional $375 million on acquisition and integration costs and to achieve $130 million of cost synergies over three years.