NAB home loan growth slows as profits rise

afr.com:

National Australia Bank lifted cash profit by 8.8 per cent to $7.7 billion for the 2023 financial year and boosted its final dividend to 84¢ a share, but pointed to a “more challenging environment” in its second half and for 2024.

Chief executive Ross McEwan said NAB is facing intense competition that is erasing the benefits of higher interest rates in the home lending market, and is reducing loan growth to preserve margins.

It is instead directing more lending to business customers.

The retail bank’s cash earnings fell 9.1 per cent to $1.4 billion over the financial year, as NAB took the “deliberate decision to slow down growth of home lending where returns have been challenged”, he said.

NAB CEO Ross McEwan, in Sydney to report the bank’s results, has warned 2024 will be challenging.  Louie Douvis

“Given a number of sector headwinds this year including heightened refinancing activity and competitive pressures, we adopted a disciplined approach to originating new home loans,” Mr McEwan said.

There are some signs of credit quality deteriorating. Ninety-day arrears and gross impaired assets jumped nine basis points to 0.75 per cent in the half, with the key drivers “higher delinquencies across the group’s home loan and business lending portfolios”. NAB lifted provisions to cover for future losses and said it expected arrears to continue to tick-up, but the vast majority of borrowers remain resilient.

While most key metrics were higher over the full year, the result pointed to a tougher second half, as underlying profit in the personal, business and corporate banks fell compared to the first six months of the year. Cash earnings were down 10 per cent over the second half, contrasting with the positive 8.8 per cent