NAB reported net profit of A$2.5 billion for the year to September – a fall of 46.7 per cent compared with the previous corresponding period.
On a cash basis, profit fell 36.6 per cent to $3.7 billion. The fall in earnings was largely due to a $1.84 billion increase in the bank’s credit impairment and a number of notable items, including $266 million after tax for customer remediation, $90 million for payroll remediation and $94 million for impairment of property related assets.
Income: Net interest income of $13.9 billion was up 2.2 per cent compared with the previous year. Other operating income fell 14.4 per cent to $3.4 billion. Total net operating income fell 1.4 per cent to $17.2 billion.
Expenses and cost to income: Operating expenses, excluding large notable items, rose 2 per cent year-on-year to $7.7 billion. The cost-to-income ratio rose from 42.8 per cent to 44.3 per cent.
Impairment expense: The credit impairment charge increased by $1.84 billion to $2.8 billion. This was largely the result of a $1.79 billion increase in forward looking provisions related to COVID-19. The credit impairment charge as a proportion of gross loans and acceptances rose from 16 basis points in September last year to 54 bps in the latest half.
Credit quality: Delinquent loans (90 days or more past due) rose from 93 bps to 103 bps year-on-year, while loans on watch list rose from 103 bps to 258 bps. The bank said the big increase in watch list loans reflected a review of business customers in industries heavily affected by COVID, such as aviation.
Margin: NAB’s net interest margin fell just one basis point to 1.77 per cent. The bank said competitive pressure and higher liquidity were the main factors driving NIM lower, and these would continue to pose problems in the current financial year.
Return on equity: The bank’s ROE was cut in half, falling from 9.1 per cent to 4.4 per cent year-on-year. On a cash basis it fell from 12.4 per cent to 8.3 per cent.
Earnings per share: Earnings per share fell 86.5 per cent to 82.1 cents a share.
Dividend: NAB declared a second half dividend of 30 cents a share, taking the total payout for the year to 60 cents – down from $1.66 a share in 2018/19. The payout ratio is 49.6 per cent of cash earnings. The bank is offering a dividend reinvestment plan with no discount.
The divisions: NAB’s biggest division, business and private banking, made a profit of $2.5 billion for the year to September – down 11.6 per cent on the previous corresponding period. The personal banking division’s profit rose 9.5 per cent to $1.4 billion. The corporate and institutional banking division’s profit fell 2.6 per cent to $1.5 billion. The New Zealand division’s profit fell 2 per cent to $977 million.
Market share: The bank had a disappointing year in the Australian mortgage market, with home loan balances falling from $304 billion to $299 billion year on year. New lending of $37 billion was more than offset by a