*
H1 cash profit A$4.07 bln, up 17%
*
Net interest margin shrank in March 2023 quarter from
prior qtr
*
Shares fall 8% in morning, other big banks fall more than
2%
(Writes through with CEO quotes, share price and investor
comment)
By Byron Kaye and Himanshi Akhand
May 4 (Reuters) - National Australia Bank Ltd ,
the country's No. 2 lender, fell short of analyst forecasts in
half-year profit released on Thursday and took a hit to its
share price after warning that the windfall from rising interest
rates had peaked.
Profit at the bank, also Australia's biggest business
lender, jumped 17% to A$4.07 billion ($2.72 billion) in the half
year to March as higher rates allowed banks to widen their
margins, but fell short of the A$4.15 billion average analyst
forecast, according to Refinitiv.
The company's net interest margin, a closely watched measure
that shows the amount banks take in interest payments minus
operating costs, also grew from a year earlier but shrank in the
March 2023 quarter from the prior quarter, hit by fierce
competition for refinancing loans.
The update signals a tough new phase for Australia's
lenders which have benefited from a year of rising interest
rates by charging more to borrowers while limiting the amount
they pay deposit-holders. Competition in a 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, their
biggest intraday fall since March 2020 and helping to drag down
the broader market 0.6%, as investors worried that the
sweet spot for banks had turned sour.
Shares of rivals Commonwealth Bank of Australia ,
Westpac Banking Corp , ANZ Group Holdings Ltd and Macquarie Group Ltd , all due to report earnings in
the next week, were down more than 2%.
"What the market's concerned about is the exit NIM (net
interest margin)," said Hugh Dive, chief investment officer at
Atlas Funds Management which holds bank stocks.
"It suggests it peaked in Q1 - December last year."
He said the structure of NAB's mortgage book was also a
cause for concern.
A higher-than-expected proportion of customers are on
fixed-rate home loans which would expire in 2024, exposing them
to higher floating rates, and more stress for consumers will
mean more stress for the lenders.
"There's a bit more pain next year and it's a bit more
lengthened," Dive added.
NAB CEO Ross McEwan said the company was focusing on
expanding business in areas more profitable than mortgages, such
as business lending, where profit in the half-year grew by
one-fifth from the same period a year earlier.
In personal banking, which includes mortgages, profit shrank
slightly due to a A$393 million impairment charge. The bank said
that partly reflected lower house prices as the impact of rising
living costs spread through the economy.
Still, McEwan said, the bank expected that the world No. 13
economy would avoid a "pronounced economic correction" and that
bad debts would remain low. The bank had telephoned 7,000
borrowers deemed to be most vulnerable to rising interest rates
and just 13 had requested assistance.
"It's showing resilience in the market, it's showing that
full employment is really helping," he said on a call with
journalists. He noted that the country's unemployment rate, at
3.5%, is the lowest in decades.
NAB declared an interim dividend of 83 Australian cents per
share, up from 73 cents a year earlier.
($1 = 1.4990 Australian dollars)
(Reporting by Byron Kaye in Sydney, Himanshi Akhand and
Jaskiran Singh in Bengaluru; Editing by Maju Samuel and Edmund
Klamann)
