Big drop in profit but NAB upbeat

NATIONAL Australia Bank chief Ross Mcewan says he is optimistic about the nation’s economic future despite the lingering challenges of the pandemic-induced recession.

Mr Mcewan says the Victorian economy is “getting going again”, with spending in key sectors such as hospitality and retail up strongly over the five-day period from October 28 to November 1, after many restrictions were withdrawn.

However he said challenges remained, including resuscitating central Melbourne.

“I’m optimistic for a business-led recovery with NAB at the centre,” Mr Mcewan said.

“We are seeing hopefully a sustainable rebound. Notwithstanding our challenges, we have fared better than most in both health and economic terms. There is certainly nowhere else in the world I would prefer to be right now.”

Despite this, the NAB chief executive acknowledged the pandemic had done a lot of damage to businesses.

Mr Mcewan has said the outlook for business remained “highly uncertain” and the pace of recovery was likely to be uneven across industries.

The hit to activity had seen a large deterioration in the labour market, with unemployment expected to peak at 8.1 per cent early next year before gradually recovering to 5.9 per cent at the end of 2022, he said.

He was speaking after NAB reported a net profit for the year to September of $2.56bn — down 46.7 per cent from the previous year.

Cash earnings, which is a measurement of underlying profitability that is closely watched in the banking sector, fell 36.6 per cent to $3.71bn.

The bank took a hit for impaired lending of $2.76bn — three times the amount from the year earlier — which was a major drag on the result.

It has also set aside $1.86bn in extra forward-looking provisions, reflecting potential future effects of the pandemic.

The bank said about nine in every 10 mortgage and business loan customers who had deferred repayments due to the pandemic were again repaying their loans or confirmed they would be able to resume repayments as support was tapered.

Mr Mcewan said a small proportion of customers would probably need ongoing support well into 2021.

The bank did not know yet whether such customers would be able to resume repayments.

“We won’t know that for at least the next three months,” he said.

Analysts at investment bank Credit Suisse said the results were in line with their forecasts, although bad debts were 4 per cent lower than expected.