NAB Full Year Profit Rises 8.3% -- Update

By Alice Uribe

SYDNEY--National Australia Bank Ltd. said rising interest rates helped its annual profit to increase by 8.3%, with the lender lifting its final dividend by 16%.

The bank said net profit for the 12 months through September rose to 6.89 billion Australian dollars (US$4.48 billion). Analysts had expected a full-year net profit of A$7.16 billion, according to FactSet's consensus estimate.

"An ongoing focus on strong balance sheet settings has been key to delivering sustainable growth and keeping the bank safe," Chief Executive Ross McEwan said. "After 11 years of interest rate reductions, earnings have also benefited in FY 2022 from the rising interest rate environment."

Directors of the company raised its final dividend by 16% to A$0.78 per share, compared with A$0.67 last year.

Cash earnings--a profitability measure tracked closely by analysts--rose by 8.3% to A$7.10 billion. Stripping out the impact of the Citi consumer business acquired in June, revenue rose by 7.8%, which the lender said reflected higher volumes and slightly higher margins excluding its Markets & Treasury unit.

NAB's Corporate and Institutional banking unit was a standout with annual cash earnings up 35% to A$1.63 billion, while the Business and Private Banking unit's cash earnings rose 22% to A$3.01 billion. Still, NAB's Personal Banking unit's cash earnings fell by 3.6% to A$1.60 billion, which the lender attributed to margin pressure from home lending.

NAB's full-year net interest margin--the difference between the interest income generated and the amount of interest paid out to lenders--fell 6 basis points to 1.65%, but on an adjusted basis it rose 1 basis point. The lender said this primarily reflected higher earnings on deposits and capital as a result of the rising interest rate environment, but said this was mostly offset by mortgage competition.

"In home lending, process and technology improvements and further development of our simple and digital home loan platform are delivering better service outcomes in FY 2022. Unconditional approval times reduced compared with FY 2021," said NAB.

The lender sees the Australian mortgage market changing in the future, with credit demand slowing and a push toward refinancing, which will increase competitive pressure between lenders.

"While there are a number of uncertainties in the outlook, the most likely scenario has forecast inflation peaking in the December 2022 quarter before easing through 2023," said NAB. "This would see the cash rate peak at 3.60% in March 2023, but a more inflationary outcome would likely mean greater monetary policy tightening and a more pronounced economic correction."

The group's Common Equity Tier 1 capital ratio was 11.51% at the end of September, compared with 13% the previous year.

Write to Alice Uribe at alice.uribe@wsj.com

(END) Dow Jones Newswires

November 08, 2022 17:09 ET (22:09 GMT)

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