NAB results exceed expectations
(27 October 2016 – Australia) National Australia Bank (NAB) announced results exceeding market expectations, however returns remained under pressure from rising bad debts, tighter lending margins, as well as regulatory constraints and requirements placed on capital.
Reports suggest that market analysts continue to think that the bank will cut its dividend, suggesting that the likelihood will increase when regulators finalise their decisions on new capital standards at the end of this year.
The bank allowed almost A$6 billion in less profitable loans to large corporations to lapse, preferring to allocate capital into home small business loans.
Its expenses dropped by 1.9 percent in the second half of the year, compared with March.
NAB’s revenue grew by 2.5 percent, with Thorburn saying that: "The cost base of the bank is well over $6 billion, there's plenty of opportunity for us to get more and more efficient every single half, and every single year, without being overly aggressive and short-term.”
Thorburn told Fairfax: "I think it's smaller, it's leaner, it's simpler and we're targeting our growth in markets and client segments that we really know, understand and we've got a good position in."
The bank said it will maintain dividend payouts. Thorburn said it made "absolute sense" to pay out the dividend because the bank had generated high amounts of capital, but the board would assess each dividend decision depending on capital requirements, its outlook, and earnings.
NAB's return on equity slipped by 0.5 percentage points to 14.3 percent, Thorburn said there would be "downward pressure" on this metric. Its net interest margin – a measure of what it charges for loans compared with its funding costs – narrowed from 1.9 percent to 1.88 percent.
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