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Date : 14/11/2023

National Australia Bank (ASX: NAB) Reports Robust Growth and Increased Dividends in FY23 Results

The National Australia Bank (ASX: NAB) has announced its financial results for the fiscal year ending 30 September, revealing a notable performance amidst a complex economic climate. The NAB share price is one to watch as the bank reports substantial growth in its operating income and profits, alongside a healthy increase in its final dividend payout.

NAB Results Highlights

NAB’s shares are trading at $28.38 apiece and have surged around 8% in the past 6 months. The current market cap of the company is around 88.82 Billion AUD.

asx nab dividends news

  1. Net Operating Income: Increased by 12.9% to $20,654 million.
  2. Cash Earnings: Grew by 8.8% to $7,731 million.
  3. Statutory Net Profit: Rose by 7.6% to $7,414 million.
  4. Group CET1 Ratio: Reported at 12.22%.
  5. Final Dividend: Increased by 7.6% to 84 cents per share.

What Happened During FY23?

During the 12 months, NAB’s financial growth was driven by an increase in net operating income, including a significant rise in net interest and other operating income. Despite operating expenses also rising by 9.1% to $9,023 million, the bank’s underlying profit growth of 16.1% to $11,631 million clearly indicates its robust operational management.

However, the bank’s financial year was challenging. A sizeable credit impairment charge of $802 million was reported a substantial increase from the previous year’s $125 million. NAB’s management has explained that these charges largely reflect volume growth, a deterioration in asset quality, and higher specific charges from a low base.

What Were The Main Contributors to NAB’s Earnings?

The performance of NAB’s various divisions played a significant role in the fiscal year’s results. The Business and Private Banking divisions were key performers, with the former showing a 10.1% increase in cash earnings due to volume growth and improved margins despite higher operating costs. NAB’s Corporate and Institutional Banking arm also delivered strong results, with cash earnings up by 14.9%, driven by revenue growth and higher margins.

The New Zealand division contributed positively with an 8.5% rise in cash earnings, reflecting higher margins and volume growth. In contrast, the Personal Banking division faced challenges, with a 9.1% decrease in cash earnings, impacted by increased credit impairment charges.

3 Takeaways From NAB’s Results

  1. Mortgage Competition Persists: Despite the end of cashback deals, NAB retains most customers with expiring fixed rates. However, profit in the home loan sector has dipped.
  2. Rising Expenses: NAB’s Net Interest Margin has decreased slightly, impacted by the mortgage competition and elevated costs, including the Citi acquisition and investment in technology.
  3. Stable Economy Indicators: Consumer resilience in the face of rising interest rates and an 8% increase in business lending suggests a healthier economy than expected, with NAB planning to increase investment in business banking.

Management Remarks

Ross McEwan, CEO of NAB, provided a positive outlook on the results, noting the bank’s strength during economic change. McEwan emphasized the bank’s consistent investment in strategic priorities, which supported growth in the SME franchise and disciplined volume growth in other sectors, such as housing, in light of the higher interest rate environment.

Outlook

Despite acknowledging a softer performance in the second half of FY23 and the challenges posed by monetary policy tightening and inflationary pressures, McEwan remains cautiously optimistic about the bank’s prospects. He pointed to the bank’s prudent balance sheet settings, strong liquidity, and maintained collective provision coverage as indicators of NAB’s readiness to navigate future economic transitions.

Conclusion

NAB’s financial report for FY23 paints a picture of a financial institution that has successfully navigated a year of economic uncertainty, delivering growth in key business areas. While the share price has declined over the last 12 months, the bank’s solid performance metrics and strategic positioning suggest a strong foundation for future stability and growth. As NAB prepares for the coming fiscal year, it focuses on delivering sustainable earnings and shareholder returns.

 

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