NAB’s profits almost double

NATIONAL Australia Bank says economic and health outcomes are improving rapidly and the business is improving momentum, as the bank posted a 95 per cent jump in first half cash profit to $3.34bn.

Excluding large and notable earnings, the interim cash earnings were up 35 per cent to $3.3bn.

Rounding out the half-year profit reporting season for the major banks, NAB, like its rivals, benefited from a sharp turnaround in credit impairments, reporting a writeback of $128m compared to a $1.2bn charge a year ago.

The interim dividend was doubled to 60c.

NAB shares fell 3 per cent to $26.56.

Chief executive Ross McEwan said the rebound in the Australian and New Zealand economies had been better than expected, making NAB optimistic about the future given the vaccine rollout and better health outcomes.

“But risks do remain,” Mr McEwan said. “The recovery is not even and some customers, such as those in international travel and hospitality, particularly in CBD areas, still face significant challenges.

“Longer-term outcomes for these customers depend on a number of factors expected to become clear in coming months. These include the impact of JobKeeper ending, timing of the vaccine rollout and the reopening of international borders.”

While the economic outlook had improved, Mr McEwan said the sustainability of the recovery was uncertain and the impact on customers was uneven.

It was therefore premature to make any “big moves” to push the federal budget back into surplus.

If the momentum of the recovery were maintained, he said, a reduction in the unemployment rate to the low-4 per cent level was likely by the end of 2021, which could lead to wage increases “across the board” instead of specific sectors.

“I think this is a priority for the government and the Reserve Bank,” Mr McEwan said.

Leaving aside the huge turnaround in soured loans, NAB’s underlying profit declined 7.6 per cent compared to the second half of last year, as markets and treasury income normalised from elevated levels. Revenue was also impacted by ultra-low interest rates and subdued asset growth.

Mr McEwan (pictured) said momentum was building across NAB’s businesses.

Cash earnings for the business and private bank fell 10.3 per cent to $1.2bn for the March half-year, mainly due to less revenue in a low-rate environment and higher expenses.

However, the NAB chief said volumes had rebounded in March, with higher market share in SME lending and a significant expansion in the pipeline of new business. In the personal bank, market share growth was expected to resume in the current half-year.