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Australia’s NAB warns of higher costs again

Australia's NAB warns of higher costs again

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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Business

Commonwealth Bank is first major bank to lift interest rates, two days after RBA rates decision

Commonwealth Bank is first major bank to lift interest rates, two days after RBA rates decision

After two days of silence, Commonwealth Bank has finally confirmed it will lift interest rates on its variable mortgages by 0.5 percentage points.

This makes CBA the first of the “big four” banks to pass on the Reserve Bank’s latest rate hike.

The RBA lifted its cash rate target by 0.5 percentage points on Tuesday, taking the new rate to a six-year high of 1.85 per cent.

It was no surprise that the commercial banks would pass on the RBA’s rate increase to their borrowers.

However, the surprising aspect is how uncharacteristically slow the banks have been in making such announcements in the past couple of days.

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Reserve Bank hikes interest rates for fourth consecutive month(Rhiana Witson)

CBA’s main rivals — Westpac, NAB and ANZ — still haven’t provided any update on their new borrowing rates.

Australia’s fifth-largest lender, Macquarie Bank, was the first bank to lift its rates — within hours of the RBA’s decision on Tuesday.

This was followed on Wednesday by ubank — an NAB subsidiary — announcing it would lift its savings rates by 0.5 percentage points in September.

Delay in being the first mover

“This kind of waiting game is unusual, but not unprecedented,” said Sally Tindall, the research director of RateCity.

“Back in 2010, three of the big four banks took between eight and 10 days to make announcements following the 0.25 percentage point RBA hike on 2 November.”

“The delay could be a worrying sign for savers. It’s possible the banks are still mulling over whether they will pass on the full hike to all their savings customers.”

“However, the big four banks could just be playing a game of chicken to see which one of them moves first.”

CBA increased its the standard variable rates for its borrowers by 0.5 percentage points.

The bank also said it would increase the rate on “select savings products”, meaning it has not passed on the RBA’s full rate hike to all savers.

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