National Australia Bank (ASX: NAB) has today announced a third quarter profit of $1.8 billion, explaining that continued low unemployment and healthy household and business balance sheets are helping mitigate the impacts of higher inflation and interest rates.
NAB CEO Ross McEwan called the performance “pleasing”, detailing that investments made to deliver simpler, more digital experiences for customers and NAB staff were supporting balanced growth and productivity benefits.
“We have a clear strategy, and executing this with discipline is our key priority,” said McEwan, who predicted productivity benefits would exceed $400 million in FY22.
“We will continue to focus on getting the basics right, managing our bank safely and improving customer and colleague outcomes to deliver sustainable growth and improved shareholder returns.”
NAB, whose $1.2 billion deal to acquire Citigroup’s consumer business became effective from 1 June, reported cash earnings up 3 per cent on the 1H22 quarterly average with lending and deposit momentum continuing.
The Citi acquisition has led to an additional $13.2 billion in gross lending balances, made up of $9.2 billion in home loans and $4 billion in credit cards and other unsecured personal lendings.
As worries over higher interest rates and cost of living pressures continue to grow, NAB has left its credit impairment charge (CIC) at $11 million, reflecting the “continued benign asset quality including low specific charges”.
“The majority of our customers are well placed to manage these challenges, including approximately 70 per cent of customer home loan repayments ahead of schedule,” McEwan said.
“For those customers who need our support, we have a range of options available. Our business is also in good shape for this evolving environment.
“Balance sheet settings remain strong, and we are well advanced on our FY22 term wholesale funding task with $34 billion raised by the end of June.”
Options open to NAB customers include adjusting loan repayments, accessing available redraw, fixing or splitting a loan, and hardship support via NAB Assist.
Excluding the impact of the Citi acquisition, NAB’s revenue grew by 2 per cent, with higher volumes partly offset by lower markets and treasury (M&T) income.
M&T also impacted net interest margin (NIM), which fell overall but benefited from the rising interest rate environment, although this was counteracted by home lending competition and higher wholesale funding costs.
NAB has provided $4.85 million of disaster relief funding since February for communities impacted by the flooding in NSW and Queensland.
Shares in NAB (ASX: NAB) have dropped 3.45 per cent as of 10.09 AEST on the back of the trading update announcement.
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