NAB reported net profit of A$6.4 billion for the 12 months to September – an increase of 148.7 per cent over the previous year. Cash profit (excluding large and notable items) of $6.6 billion was up 38.6 per cent.
Like the other major banks reporting over the past few weeks, NAB got a huge lift from a turnaround in impairments. After taking a charge of $2.7 billion in 2019/20, it reported an impairment benefit of $202 million in the year to September. The bank said its underlying earnings were down 6.8 per cent.
Income: Net interest income fell 0.6 per cent to $13.8 billion. Other operating income fell 9.9 per cent to $2.9 billion. Net operating income fell 2.4 per cent to $16.7 billion.
Expenses and cost to income: Operating expenses fell by 14.7 per cent to $7.9 billion. In 2019/20, the bank made a loss related to its investment in MLC Life and had significant restructuring costs. Excluding these notable items from the 2019/20 result, operating expenses fell 0.4 per cent year-on-year. The bank said this fall was driven by productivity benefits achieved through simplification of operations.
Impairment expense: Credit impairment fell from a charge of $2.7 billion in 2019/20 to a benefit of $202 million in the year to September. Forward looking provisions were reduced by $1.8 billion and individually impaired exposures were reduced by $1.1 billion.
Credit quality: The ratio of loans overdue by 90 days or more plus gross impaired assets to gross loans and acceptances fell from 1.03 per cent to 94 bps year-on-year. New impaired assets were $357 million in 2020/21, compared with $1.1 billion in 2019/20.
Margin: The net interest margin fell 6 basis points to 1.71 per cent year-on-year.
Return on equity: After falling to 4.4 per cent in 2019/20, the bank’s ROE rose to 10.4 per cent in the year to September. On a cash basis, ROE was 10.7 per cent.
Earnings per share: EPS rose from 82.1 cents a share to $1.93.
Dividend: The bank declared a final dividend of 67 cents a share, taking the total payout for the year to $1.27 a share fully franked, compared with 60 a share the previous year. The dividend payout ratio rose from 38.9 per cent of cash profit to 63.7 per cent. The target range for the payout ratio is 65 to 75 per cent.
The divisions: The bank’s biggest division, business and private banking, made a cash profit of $2.5 billion – unchanged from the previous year. The personal banking division’s cash profit rose 14.4 per cent to $1.6 billion. Corporate and institutional banking fell 14.7 per cent to $1.2 billion. New Zealand banking rose 18 per cent to $1.1 billion.
Market share: NAB’s Australian home loan portfolio grew at 1.1 times system over the year and market share grew from 14.38 per cent in the March half to 14.45 per cent in the September half. Australian SME lending share rose from 26.23 per cent to 26.43 per cent half-on-half. The New Zealand housing loan portfolio grew 1.4 times system grew