SYDNEY: National Australia Bank (NAB) flagged higher expenses for the second time in four months yesterday, citing higher personnel and leave costs.
NAB, Australia’s biggest business lender, bumped up its cost forecast for 2022 to between 3% and 4% from 2% to 3%.
That excludes the impact of its US$882mil (RM3.93bil) buyout of Citigroup’s local consumer business, which became effective on June 1.
Part of the cost jump comes from expected provisions of between A$60mil (RM186.6mil) and A$100mil (RM311mil) related to a previously disclosed agreement with Australia’s financial crime regulator to fix shortcomings in anti-money laundering compliance.
Cash profit at NAB did, however, come in 6% higher at A$1.8bil (RM5.6bil) for the quarter ended June 30, compared with A$1.7bil (RM5.3bil) a year ago, as it benefited from an increase in home and business lending, and growth is deposits.
The figure was in-line with Morgan Stanley’s estimate of A$1.8bil (RM5.6bil).
“As the economy changes, continued low unemployment and healthy household and business balance sheets are helping mitigate the impacts of higher inflation and interest rates,” said chief executive officer Ross McEwan.
While higher rates, soaring cost of living, and weak consumer sentiment have effectuated a reversal in home prices from record levels reached last year, McEwan said 70% of customer home loan repayments were ahead of schedule.
Runaway inflation has prompted the Reserve Bank of Australia to tighten monetary policy this year, aiding margins of banks that grappled with record-low interest rates for the past two years.
“Overall, we would view this third quarter update as very much in line with consensus with few surprises,” UBS analysts said in a note.
“The commentary on net interest margin is maybe a bit disappointing in the context of some banks which have already reported, but the underlying margin trend is as expected.”
Excluding its markets and treasury business and the impact of the Citi acquisition, NAB’s net interest margin for the April-June quarter was slightly higher than the first half’s quarterly average due to higher interest rates, partly offset by stiff competition in home lending.
The country’s biggest lender, Commonwealth Bank of Australia, will release annual results today. — Reuters
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