NAB reported unaudited cash earnings of $1.55 billion in the third quarter, down 7.0 per cent, but saw a significant fall in the number of deferred home loans and only a small increase in new deferral requests from Victoria. Most significantly, it opted not to increase its loan-loss provisioning – NAB, at least, can see the light at the end of the tunnel.
CEO Mr McEwan also hinted that the bank would soon take a tough-love approach to home loans, saying it would continue to provide support “where it makes sense” but that providing further credit “won’t always be the right thing to do”.
“Our repayment deferrals are providing vital assistance to customers, in combination with significant relief from governments and regulators,” Mr McEwan said. “Encouragingly, about 16 per cent of home loan deferral customers contacted via our check-ins have recommended payments.
“However, many customers still face an uncertain future.”
But some 47 per cent of NAB’s business bank customers are also now receiving the JobKeeper subsidy – leaving it at high risk as that support is tapered through next year – while its target of “broadly flat” FY20 expenses was now “increasingly challenging” due to COVID-19-related impacts on customer support and workout resources.
Add that to “volatile markets, subdued credit demand, [low-interest] rates, cost pressures and deteriorating asset quality” and Mr McEwan – who was brought in to rebuild NAB’s business and reputation in the wake of the royal commission – has his work cut out for him.
“We have a clear plan for NAB and we are getting on with it, including quickly embedding our new operating model and creating clear accountabilities,” Mr McEwan said. “We are investing in our colleagues and executing fewer, more important projects. This will make a real difference to how well we serve customers and drive sustainable performance.”
NAB is set to invest $50 billion over three years in education and accreditation for its employees, “building greater capability and skills to serve customers well”. The bank also continues to work towards exiting MLC Wealth, saying operational separation was “an important milestone”. While a public markets exit remains under consideration, NAB is also exploring “alternative transaction structures” including a sale of the business.
