NAB ups dividend as cash pours in

NATIONAL Australia Bank has increased its interim dividend after a strong performance in the March half-year across its operations, lifting market share in housing, business, unsecured lending and deposits.

However, consistent with a revised outlook of higher growth, inflation and interest rates, the bank said it was no longer targeting an absolute cost reduction by 2023-25.

Given growth opportunities across the bank and inflationary pressures, NAB said it now expected cost growth of 2-3 per cent in the current financial year, with cumulative productivity benefits of more than $400m.

This included the cost of the recent enforceable undertaking signed with financial intelligence agency Austrac.

NAB reported interim cash earnings of $3.5bn, up 4.1 per cent from a year ago, and lifted the dividend by 13c to 73c.

Revenue growth of 4.6 per cent was the standout due to pricing discipline and strong growth in lending and deposits, which were up 10 per cent and 12 per cent respectively.

Chief executive Ross McEwan said execution of the strategy was delivering good results for customers, staff and shareholders.

“We are producing better and faster experiences and getting the basics right more consistently,” Mr McEwan said.

“This has been achieved during a period of increased customer activity across all divisions of the bank, including the fastest growth in business lending since the global financial crisis.”

The result, he said, was delivered while maintaining a strong balance sheet. The group’s common equity tier one ratio was 12.48 per cent at the end of March, despite completing a $2.5bn buyback and a further buyback of the same magnitude starting this month.

Term funding for the 2022 financial year was also welladvanced.

Mr McEwan said the increase in the dividend reflected progress in the strategy, confidence in the sustainability of the bank’s performance and continuing optimism in the medium-term outlook for Australia and New Zealand.

Responding to the 50 basispoint rate increase by the US Federal Reserve (the biggest move since 2000), he said he had not seen official rates move so quickly in his career, particularly after an 11-year downward cycle.

Inflation, he said, was “really biting in”, which was not good for the economy in the long term even though it was a global phenomenon.

While NAB was anticipating a further three RBA increases this year, Australia as a large commodity exporter was in a strong position to grow.

After two years of no migration, the main challenge for businesses in Australia was hiring people with the right skills.

Mr McEwan agreed with commentary by his ANZ counterpart Shayne Elliott on Wednesday that the 25 basispoint rate rise by the RBA would only have a modest impact on borrowers.

NAB stress-tested its homeloan customers at an interest rate of 2.75 to three percentage points higher than the product rate, and most of the bank’s customers were four years ahead on their scheduled repayments.