A high interest rate environment has benefited Australian banks, but they now face headwinds from rising bad debt and increasing competition for mortgages.
Last week, the country’s biggest lender Commonwealth Bank of Australia (OTC:CMWAY) posted record annual profit on the back of rising interest rates, but warned higher living costs were pushing up debt arrears and competition was squeezing margins.
NAB’s net interest margin – a key measure of profitability – slipped to 1.72% in the April-June quarter from 1.77% as at March 31. The country’s second-biggest lender, however, reported a 5% increase in cash earnings from higher interest rates.
“We know this environment is challenging for our customers, but pleasingly, most are proving resilient with only a modest deterioration in asset quality in 3Q23,” said NAB Chief Executive Ross McEwan.
The bank announced a A$1.5 billion ($973.05 million) share buyback, which will result in the reduction of the common equity tier 1 (CET1) ratio – a measure of a bank’s capital position and financial strength – by 35 basis points.
The ratio stood at 11.9% as at June-end, down from 12.2% as at March-end.
Loan repayments delayed more than 90 days stood at 0.71% of the bank’s total gross loans, up five basis points from the previous quarter, in line with what CBA reported last week.
NAB recorded a credit impairment charge of A$244 million for the quarter, which reflected a modest deterioration in asset quality across the group and volume growth.
It posted cash earnings of A$1.90 billion, compared with A$1.80 billion a year earlier. Analysts had expected A$1.83 billion, according to Visible Alpha consensus.
($1 = 1.5415 Australian dollars)
Source: Economy - investing.com
