NAB's annual profit beats estimates on provisions release

[SYDNEY] National Australia Bank on Tuesday reported a 76.8 per cent jump in annual profit that beat analysts' estimates, as a reversal in provisions to cover potential pandemic losses more than offset lower earnings in its corporate lending unit.

Australia's second-largest lender posted above-average growth in home lending and said its "optimism about the future" was reflected in a dividend of 67 Australian cents a share, more than double last year's payout.

Australian banks have recovered from the pandemic earlier than their global peers, as record low interest rates and the country's swift economic rebound have driven up property prices and credit growth.

"While some uncertainties exist in the outlook including the impact of tapering support ... we are well positioned for the expected economic rebound in Australia and New Zealand," chief executive Ross McEwan said in a statement.

Cash profit rose to A$6.56 billion (S$6.54 billion) for the year to Sept 30, compared with A$3.71 billion last year, and beating a Refinitiv estimate of A$6.43 billion.

Australian housing lending grew 4 per cent over the year and "importantly, this growth is not sacrificing returns," McEwan said, in a reference to smaller rival Westpac Banking Corp which last week revealed its growth in mortgages had come at the cost of lower margins.

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The bank released A$217 million of provisions it had kept aside for the pandemic's fallout.

NAB is Australia's largest business lender but earnings at its corporate banking division fell 14 per cent, driven by lower markets income and higher credit losses related to a partial sale of an aviation portfolio, it said.

OIL & GAS CAPS

A review of its fossil fuel lending policies resulted in a new cap on oil and gas "at default" exposures of US$2.5 billion to 2025, and a reduction thereafter to be aligned with the International Energy Agency by 2050.

"We've had a number of very strong activist groups say to us, we want you to abide by the IEA. Actually, we think that's the right thing to do and that's what we've actually done,"McEwan said.

NAB, which is also being targeted by activists for financing gas projects in Australia, said it would limit its "direct"funding to projects that play a role in national energy security.

It would not directly finance greenfield gas extraction projects outside Australia, but would continue to fiance integrated liquefied natural gas in Australia, New Zealand, Papua New Guinea and other selected regions.

"The new policy contains so many allowances and loopholes that it's unclear how it will materially impact the bank's lending for new fossil fuel developments moving forward," said activist group Market Forces in a statement.

REUTERS