National Australia Bank (NAB) has reaffirmed cost guidance but told shareholders the global credit crunch will be more widespread than previously thought.
NAB told its shareholders’ annual meeting in Perth yesterday that it faces challenging times in the wake of sub-prime issues, complicated by the threat of a United States recession and higher lending costs.
“World markets are very volatile and likely to remain that way for some time to come,” NAB chief executive John Stewart said.
“This uncertainty.is likely to be longer lasting and more widespread than we all thought last year.”
Australia’s biggest bank said it is considering raising its interest rates following the Commonwealth Bank of Australia’s 30 basis point rise and Westpac and St George’s 25 basis point rise yesterday in response to the Reserve Bank’s 0.25 per cent official raise on Tuesday.
Stewart said the bank’s costs would remain below inflation levels for the next two years.
“Annual operating expense growth will remain within inflation to 2010,” he said.
The bank will continue to look for opportunities to grow its revenue like its acquisition of US bank Great Western last year, he said.
NAB chairman Michael Chaney said the bank is weathering the lending squeeze.
“The bank is well capitalised and has strong funding capability, notwithstanding the current higher borrowing costs being experienced by all financial institutions.”
NAB returned cash profit of $4.4 billion in the 2006/07 financial year, 17 per cent higher than the previous corresponding period.
Shareholders rewarded NAB yesterday, with its shares climbing two cents to $32.80 at the close of trade.
