Australia’s NAB warns of end to windfall due to rising interest rates


  • First half cash profit of A$4.07 billion, up 17%
  • March 2023 quarter net interest spread narrowed from the previous quarter
  • Stocks fell 8% in the morning, other big banks fell more than 2%

May 4 (Reuters) – National Australia Bank (NAB.AX), the country’s second-largest lender, hit its share price with half-year profits released on Thursday that fell short of analyst expectations . Rising interest rates hit a ceiling.

Profits at the bank, which is also Australia’s largest business lender, rose 17% to A$4.07 billion ($2.72 billion) in the six months to March as rising interest rates allowed banks to stretch margins. ), but fell short of the average analyst forecast of A$4.15 billion. According to Refinitiv.

The company’s net interest margin, which shows how banks make interest payments minus operating costs, increased from the same period last year, but the March 2023 quarter is hit by intense competition for refinancing loans, which is below the previous quarter’s margin. decreased from

The update marks a tough new phase for Australian lenders, which have benefited from a year of rising interest rates by charging borrowers more while limiting how much they pay deposit holders. I’m here. Competition in the stagnant mortgage market has become so fierce that some banks are offering cash payments to lure borrowers.

NAB shares fell as much as 8% in morning trading, the biggest intraday drop since March 2020, prompting investors to invest more in the broader market (.AXJO) as they worried banks’ sweet spot had deteriorated. We lowered it by 0.6%.

Shares of rival Commonwealth Bank of Australia (CBA.AX), Westpac Banking (WBC.AX), ANZ Group Holdings (ANZ.AX) and Macquarie Group (MQG.AX) are all scheduled to report results next week . , fell more than 2%.

“What the market is worried about is exit NIM,” said Hugh Dive, chief investment officer at Atlas Funds Management, which owns bank shares.

“It suggests that it peaked in the first quarter of last December.”

He said the structure of NAB’s mortgage book is also a concern.

A higher than expected percentage of customers have taken out fixed rate mortgages that expire in 2024, exposing them to higher floating rates.

“Next year will be a little more painful and a little longer,” Dive added.

NAB CEO Ross McEwan said the company is focused on growing its business in more profitable areas than mortgages. For example, half-year profits increased by one-fifth from the same period last year.

Personal Banking, which includes home loans, slightly reduced earnings due to impairment charges of A$393 million. The bank said it partly reflected falling home prices as the impact of higher living costs spread across the economy.

Still, McEwan said the bank expects the world’s 13th-largest economy to avoid a “significant recession” and bad debts to remain low. The bank called the 7,000 borrowers he considered most vulnerable to rising interest rates, but only 13 called for help.

“It shows the resilience of the market and shows that full employment is really helping,” he said in a call with journalists. He pointed out that the country’s unemployment rate is 3.5%, the lowest in decades.

NAB has announced an interim dividend of 83 Australian cents per share. This is up from 73 cents the previous year.

($1 = 1.4990 Australian Dollar)

Reported by Himanshi Akhand and Jaskiran Singh of Bengaluru.Edited by Maju Samuel

Our standards: Thomson Reuters Trust Principles.

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