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NAB shares sink over 6% despite ‘strong’ half-year results

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NAB feels “well placed” to withstand failures on the global banking scene and projects continued growth.

NAB has reported cash earnings of $4.07 billion for the half year ended 31 March, a 17.0 per cent increase on the same period a year earlier, with the bank benefiting from higher interest rates while facing the challenges of increased competition and slower economic growth.

In its half-year results released to the ASX on Thursday, NAB chief executive officer Ross McEwan said that the bank had delivered “strong 1H23 financial performance”, with all of its businesses contributing to a reported 25.5 per cent increase in underlying profit to $6.11 billion.

“Our results have benefited from the execution of our strategy over multiple years,” he said.

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“This includes consistent investment in long-term growth opportunities, while making choices for more targeted growth against the backdrop of a slowing economy and increasing competition. The higher interest rate environment has also been an important near-term driver of revenue this period.”

However, the market was disappointed with the results, with NAB’s share price down 6.4 per cent to $26.72 at the close on Thursday. 

Revenue was reported to have increased by 19.3 per cent to $10.5 billion. The bank’s gross loans and advances lifted by 6.2 per cent while deposits rose by 8.4 per cent.

NAB’s net interest margin (NIM) increased by 14 basis points to 1.77 per cent, which it said reflected higher earnings on deposits and capital thanks to the rising interest rate environment while being partially offset by home lending competition and higher funding costs.

The big four bank also reflected on banking failures in offshore markets and acknowledged that risk concerns are on the rise. It, however, assured that it is “well placed to manage through this period” and continue to grow.

“Staying safe”, NAB said, requires it to maintain prudent balance sheet settings and consistently manage risk with discipline.

“Collective provisions as a ratio of credit risk weighted assets remain well above pre-COVID-19 levels at 1.42 per cent and our CET1 ratio of 12.21 per cent is above our target range of 11.0–11.5 per cent,” the bank said.

“The share of lending funded by customer deposits remains high at 81 per cent and our liquidity position is well above the regulatory minimum. Deliberate actions taken over many years mean our lending exposures are in good shape with modest exposure to segments most at risk in an environment of higher interest rates and higher inflation.”

NAB details key divisional performance

NAB’s personal banking division recorded a 0.4 per cent dip in cash earnings to $785 million. A strong rise in underlying profit was offset by an increase in credit impairment charges.

Meanwhile, the business and private banking division posted a 19.9 per cent rise in cash earnings to $1.71 billion, with strong underlying profit growth and higher revenue in reflection of volume growth and increased margins in the division.

Higher cash earnings were also reported for NAB’s corporate and institutional banking division (up 16.6 per cent to $940 million) and its New Zealand banking division (up 23.5 per cent to $825 million).

“We expect further challenges to emerge as the economic transition continues but we remain confident in the outlook,” NAB noted.

“While growth is slowing, the Australian economy appears resilient, and we have attractive options for growth across our business with strong balance sheet settings. We remain focused on executing our long-term strategy to deliver sustainable growth and attractive returns for shareholders.”

NAB shares sink over 6% despite ‘strong’ half-year results

NAB feels “well placed” to withstand failures on the global banking scene and projects continued growth.

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Jon Bragg

Jon Bragg

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.

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