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Q1 cash profit up 19%, beats estimates
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Loan growth, high interest rates boost profit
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Net interest margin rises 12 bps
(Recasts with details on credit impairments)
By Sameer Manekar and Praveen Menon
Feb 16 (Reuters) - National Australia Bank on
Thursday posted a 19% jump in first-quarter cash profit helped
by rising interest rates, but the lender warned of headwinds as
house prices soften and borrowers get squeezed by rising living
costs.
Australian banks are expected to post strong earnings in the
high interest rate environment, but the lenders' run is set to
fade later this year as a cooling economy is expected to result
in slower credit growth and more bad debt.
"The higher interest rate environment, resulting from
central bank actions to curb inflation, has benefited our
revenue this period," NAB Chief Executive Officer Ross McEwan
said.
"But this is also causing economic growth and house prices
to soften, and loan repayments to increase. We know these
changing circumstances, combined with cost of living pressures,
will create difficulties for some of our customers...," he
added.
After eight rate hikes through 2022 and a further
quarter-basis point raise last week, the central bank has
indicated more tightening ahead to stamp out inflation. Soaring
rates have cooled the housing market and added to rising cost of
living pressures.
NAB took a $158 million credit impairment charge, up 23%
compared to the quarterly average in the second half of last
year, which it said reflected the impact of lower house prices
and business lending volumes.
Earlier in the week, country's biggest lender Commonwealth
Bank of Australia delivered record half-yearly profits
but warned of headwinds facing its mortgages business and
concerns its margins may have peaked.
For the first-quarter ended Dec. 31, NAB said net interest
margin, a key measure of profitability, rose 12 basis points to
1.79% in the reported quarter, while its common equity tier 1
(CET1) ratio was at 11.3% as of Dec. 31, compared with 11.51% as
of Sept. 30.
"Today’s result should provide some comfort that NIMs still
have tailwinds from rising rates should asset pricing issues be
managed appropriately," Citibank analyst Brendan Sproules said
in a note.
“Having said that, we maintain our view that NIMs should
peak in the second half of 2023, and, consequently, we remain
close to an inflection point.”
NAB posted cash earnings of A$2.15 billion ($1.48 billion)
for the quarter ended Dec. 31, compared with A$1.80 billion a
year ago. Analysts had expected cash earnings of $2.01 billion,
according to Visible Alpha consensus.
The ratio of bank's stressed loans, interest payments on
which are delayed for over 90 days, to gross loans and
acceptances fell to 0.62% as of December-end from 0.66% in
September-end.
($1 = 1.4480 Australian dollars)
(Reporting by Sameer Manekar in Bengaluru; Editing by Shinjini
Ganguli and Stephen Coates)
