Despite facing headwinds from rising rates and inflation, NAB's annual cash profit surged 8.8% to $7.7 billion, while its underlying profit rocketed to 16.1% compared with 2022.
NAB CEO Ross McEwan (pictured above), who was discussing the release of the bank's full-year results on Thursday, said the environment became more challenging in the second half of the year and was likely to remain so in the near-term.
“We saw the impact of higher interest rates in our first half performance. However our results softened in the second six months amid intense competition as customers seek the best deal,” McEwan said.
“This is all leading to some of the thinnest mortgage margins I’ve seen in my time in Australian banking.”
NAB’s growth was largely driven by its SME franchise with Business & Private Banking increasing lending 9% and deposits 8%, underpinning a 22% rise in underlying profit in FY23.
“All our businesses have played their part. In particular our leading Business franchise has continued to grow. This is a great franchise, with great customers and bankers, and we’re determined to keep investing in it to make even better,” McEwan said.
On the other hand, NAB’s home loan lending was more subdued increasing by only 1.8%.
McEwan said in the Australian housing sector, NAB took a “more measured approach to growth” this year with a focus on returns.
“Challenges in our operating environment became more evident as FY23 progressed with the impacts of monetary policy tightening and inflationary pressures increasingly weighing on households and the economy,” McEwan said.
McEwan said this has caused financial results to soften in 2H23 compared with 1H23.
Still, NAB has maintained its mortgage market share throughout the year, writing 14.6% of the mortgage market.
“While the economic transition has further to go, we are well placed to navigate this environment,” McEwan said. “We continue to see attractive growth options and productivity is helping us manage inflationary pressures.”
“We also have prudent balance sheet settings consistent with a focus on keeping the bank and customers safe through the cycle. Collective provision coverage has been maintained well above pre COVID-19 levels.”
NAB has also passed on the RBA’s November interest rate increase to variable rate borrowers.
Rates have been rising since May last year, when the Reserve Bank of Australia began hiking the cash interest rate in a bid to head off inflationary pressures in the economy.
“Some customers are feeling it more than others and the RBA’s decision to again increase the official cash rate this week because of persistent inflation will increase the pressure on households,” McEwan said.
