Rising Interest Rates Help Deliver $7.4 Billion Profit to National Australia Bank

A man walks past a National Australia Bank (NAB) branch in Melbourne, Victoria, Australia, on Oct. 27, 2023. Susan Mortimer/The Epoch Times

National Australia Bank’s (NAB) net profit grew 7.6 percent to $7.4 billion (US$4.7 billion) during the 2023 financial year.

The bank reported net interest income had risen 13.2 percent on the previous financial year to $16.8 billion (US$10.8 billion).

Meanwhile, bank’s net operating income lifted 12.9 percent to $20.7 billion in the 12 months ending Sept. 30.

Statutory net profit rose 7.6 percent to $7.4 billion, while the bank also provided shareholders with a fully franked final dividend of 84 cents per share.

The bank also delivered a 8.8 percent increase in cash earnings to $7.7 billion.

This dividend builds on an 83 cents per share interim dividend provided to shareholders in the first half of the financial year.

The net interest margin (NIM) rose by 9 basis points to 1.74 percent, reflecting higher earnings on deposits and capital amid the “rising interest rate environment.”

NAB shares are currently up 1.54 percent and are trading at $29.62 per share at the time of writing.

NAB CEO Ross McEwan described (pdf) the performance as “strong” and believes NAB is well placed to navigate the economic transition. He noted while the Australian economy is slowing, it is proving resilient.

“We have delivered a strong FY23 performance with cash earnings up 8.8 percent and underlying profit rising 16.1 percent compared with FY22. During a period of economic change, these results have benefitted from consistent investment in our strategic priorities,” Mr. McEwan said.

“This has supported another year of strong growth in our leading small and medium enterprises franchise with business and private Banking increasing lending 9 percent and deposits 8 percent, underpinning a 22 percent rise in underlying profit in FY23.”

Mr. McEwan noted in other sectors such as Australian housing, the bank took a more measured approach to growth this year with a focus on returns.

Despite these strong financial results overall, NAB’s performance in the second half of the financial year declined.

For example, looking at September 2023 compared to March 2023, NAB cash earnings fell by $409 million or 10 percent. Statutory net profit fell by 13.1 percent in the same time frame. Net interest income fell 1.7 percent or $145 million compared to the first half of the financial year.

Mr. McEwan said challenges in the bank’s operating environment became more evident as the 2022-23 financial year progressed with the impacts of monetary policy tightening and inflationary pressures increasingly weighing on households and the economy.

Mr McEwan said this has resulted in NAB financial results softening in the second half of the financial year.

“While the economic transition has further to go, we are well placed to navigate this environment. We continue to see attractive growth options and productivity is helping us manage inflationary pressures,” Mr. McEwan added.

“Our focus remains on managing NAB for the long term to drive sustainable growth in earnings and shareholder returns over time,” he said.

The higher interest rate environment supported the 2023 financial year results, but this was offset by elevated competition and inflationary pressures in the second half of the year.

A National Australia Bank regional branch at night in Albany, Western Australia, on Nov. 8, 2023. SUSAN MORTIMER/THE EPOCH TIMES

Digital banking

NAB said it plans to provide “simpler” digital banking experiences to customers to “drive quicker, better outcomes”.

The bank said simple everyday banking products opened digitally rose to 74 percent in the 2023 financial year. This was higher than 71 percent in the 2022 financial year and 62 percent back in 2020.

Australian home lending is a key market for NAB’s digital banking experiences.

“This includes further progressing our simple and digital home loan initiative with rollout to brokers and business and private Banking underway in FY23,” the bank said.

In 2023, NAB launched a new digital product “Greener for Business” to help customers “understand and reduce” carbon emissions.

In a news release in October, NAB noted that Greener for Business is aligned with the United Nations (UN) Race to Zero campaign.

People walk past a National Australia Bank (NAB) branch in Melbourne, Victoria, Australia, on Oct. 27, 2023. Susan Mortimer/The Epoch Times

Economic outlook in Australia

NAB said that Australia’s economic growth continued to slow. This has been underpinned by weakness in household consumption, with spending moderating to deal with higher interest rates and cost of living pressures.

The bank said inflation is now moderating, noting the cash interest rate appears to be at or near peak levels.

“It seems likely that Australia will avoid a pronounced economic downturn,” NAB said.

But the bank also noted real growth domestic product (GDP) growth is predicted to fall from 2.7 percent in 2022 to under 2 percent in 2023 and 2024 as the population grows and household spending declines.

Unemployment rate is expected to rise to about 4.5 percent at the end of 2024, up from 3.4 percent lows.

“The extent to which households continue to adjust to cost of living pressures and higher interest rates and the timeframe over which inflation softens remain key to the outlook including the path of monetary policy,” NAB said.

Meanwhile, in New Zealand, NAB noted inflation and labour market pressures are softening and activity growth has decelerated materially. “If sustained, this suggests that the cash rate is likely at or near its peak for this cycle,” NAB said. However, NAB said fiscal policy settings in New Zealand are uncertain following the formation of a new government after the October election.