NAB has reported cash earnings of $7.73 billion for the financial year ended 30 September (FY2023), an 8.8 per cent increase on the previous financial year (FY22).
In its full-year results released on Thursday, the bank said that its statutory net profit was up 7.6 per cent to $7.41 billion and its underlying profit was up 16.1 per cent to $11.63 billion.
But NAB noted that challenges in the operating environment became more apparent as FY23 progressed, as the impacts of monetary policy tightening and inflationary pressures weighed on households and the economy.
“We saw the impact of higher interest rates in our first half performance. However, our results softened in the second six months amid intense competition as customers seek the best deal. This is all leading to some of the thinnest mortgage margins I’ve seen in my time in Australian banking,” NAB chief executive officer Ross McEwan said in a statement on Thursday.
“We also saw the broader environment get more challenging as higher rates and inflation weighed on households. Some customers are feeling it more than others and the RBA’s decision to again increase the official cash rate this week because of persistent inflation will increase the pressure on households.”
Cash earnings in NAB’s personal banking division fell by 9.1 per cent during FY23 to $1.45 billion.
In contrast, cash earnings growth was seen in business and private banking (10.1 per cent), corporate and institutional banking (14.9 per cent), and New Zealand banking (8.5 per cent).
“All our businesses have played their part. In particular, our leading business franchise has continued to grow. This is a great franchise, with great customers and bankers, and we’re determined to keep investing in it to make it even better,” said Mr McEwan.
Over FY23, revenue increased by 12.9 per cent to $20.65 billion, which NAB said mainly reflected higher margins along with stronger volumes and markets and treasury income. Gross loans and advances rose by 3.0 per cent and deposits increased by 3.7 per cent.
The bank’s net interest margin rose 9 basis points (bps) to 1.74 per cent thanks to higher earnings on deposits and capital in the rising interest rate environment, while being partially offset by home lending competition, deposit mix and higher wholesale funding costs.
Expenses increased by 9.1 per cent, which included costs associated with Citi’s consumer business, which NAB acquired last year, as well as a $40 million provision related to a one-off levy for the compensation scheme of last resort (CSLR).
NAB reported a group common equity tier 1 (CET1) ratio of 12.22 per cent, 71 bps higher than a year earlier. The bank has declared a final dividend of 84 cents per share, taking its total dividends for FY23 to 167 cents per share, 10.6 per cent higher than FY22.
“The steady, solid progress of NAB over a number of years now and our determination to get the basics right and be a good bank is seen in our results today,” Mr McEwan said.
“NAB is focused on delivering better outcomes for our customers and colleagues – regardless of the environment – and this is serving our customers and our bank well.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.