National Australia Bank slides after profit misses estimates

NATIONAL Australia Bank’s (NAB) first-half profit fell short of analyst estimates as a boost to margins from higher interest rates was offset by caution on the economic trajectory. The stock opened 6 per cent lower.

Cash earnings rose 17 per cent to A$4.07 billion (S$3.6 billion) in the six months ended Mar 31 from a year earlier, the Melbourne-based firm said in a statement on Thursday (May 4). That’s its best half-year profit on record, though it missed the A$4.18 billion estimate in a Bloomberg survey of analysts.

Australian banks have been reaping the rewards of aggressive interest-rate hikes over the past year that fuelled banks’ revenue from lending. Now, with markets pricing a pivot from the nation’s central bank to rate cuts later this year, some analysts argue earnings growth may begin to ebb.

“The economy has slowed down a bit, we are starting to see that,” chief executive officer Ross McEwan said in a video presentation. “We’re probably at the top of the inflation cycle.”

NAB shares lost as much as 6.5 per cent as of 10.08 am in Sydney. They’d underperformed the Australian financial sector index in the past year through Wednesday, down more than 10 per cent.

The lender continued a pullback from the home-loan market, instead focusing on areas such as its key business banking division, where profit surged 20 per cent. Earnings in personal banking, the division that includes home lending, dipped 0.4 per cent.

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“Very, very competitive”

“It’s very difficult in the mortgage market at the moment,” said McEwan. “Very, very competitive, margins getting knocked around there.”

Meantime, the firm’s net interest margin climbed 14 basis points to 1.77 per cent.

McEwan said customers are showing resilience in the face of rising rates and a slowing economy. “We made contact with 7,000 of our mortgage customers we thought may have been having a little bit of difficulty and only 13 have said ‘yes, we’d like some help’,” he told journalists on a conference call on Thursday. BLOOMBERG