Cautious NAB points to second-half recovery in Australian economy

National Australia Bank has outlined a cautious economic outlook as its executives addressed shareholders, warning of tough times ahead but pointing to recovery in the second half of 2024.

National Australia Bank has outlined a cautious economic outlook as its executives addressed shareholders on Friday, warning of tough times ahead but pointing to recovery in the second half of 2024.

Speaking at the bank’s annual general meeting in Sydney, NAB chief executive Ross McEwan said he expected Australia to avoid a recession this year, but warned New Zealand was “close to a ­recession”.

Mr McEwan said Australia’s economy was “well-positioned to improve in the second half of next year”, noting he was optimistic about the country’s growth engine as high immigration buoyed trading for the bank’s business ­customers.

NAB, Australia’s largest business lender, has ridden the wave of business sentiment, with its latest results showing a surge in new lending.

But the bank is also vulnerable to any slowdown, with consumer spending tapering off in the face of higher interest rates and a blowout in the cost of living.

Mr McEwan said NAB’s business customers were cautious, but many “remain ambitious for growth”.

The bank boss, who took on the top job at NAB in December 2019, said he was concerned about the implications of years of breakneck house price growth.

He said the blowout in housing costs in Australia was “one of the biggest problems facing the country right now”.

“For many seeking the great Australian dream of home ownership, it likely now feels further away,” he said.

“There has been some action, but we need to work faster to free up tracts of land and build homes.”

But NAB has also benefited from the rapid rise in prices as its loan book ballooned.

NAB has also expanded, snapping up Citi’s consumer lending arm in June 2022 as well as rolling its Ubank business into neobank 86400, which Mr McEwan acquired in 2021 in a $220m deal.

The latter move was a cause for pain at the AGM, with shareholders claiming the bank bungled the integration.

Mr McEwan apologised for some of the failures.

The bank was also rapped by shareholders over allegations it was failing to pass through better savings rates after posting record results.

Mr McEwan noted NAB’s results had not come without a fight, pointing to “very strong competition” from rivals ANZ, CBA and Westpac.

“We are experiencing very strong competition. I would expect that competition was greater in the Australian market, when you look at the deposit rates we pay in comparison to a country like the US which has over 3000 banks and the rates their customers are getting,” he said.

Mr McEwan also defended NAB’s closure of bank branches, noting that more customers were banking online. But he said NAB was still investing in branches in regional hubs, noting the bank had invested $280m in 200 branches since 2019.

He said NAB was also investing in its Bank@Post deal with Australia Post, noting he hoped to further expand the deal.

Tiwi islander elders Antonia Burke, Simon Munkara and Pirrawayingi Puruntatameri protest out side the NAB AGM over the bank’s funding of Santos gas projects in the NT. Picture: John Feder

A group of protesters assembled outside the bank meeting, calling on the bank to stop funding gas and oil projects.

Members of Tiwi islander communities also took NAB to task over its lending to Santos.

Activist shareholders put up motions pressuring NAB on climate change, achieving 28.4 per cent vote support.

Market Forces CEO Will van de Pol said “NAB must respond by closing the loopholes in its policy to ensure not another cent of its customers’ money flows to companies undermining global climate goals by expanding the fossil fuel sector”.

NAB chair Phillip Chronican said NAB was outperforming rivals, but pointed to investments in risk and money laundering controls as a sign the bank was continuing to lift its game.

He said regulatory issues from the financial services royal commission had “largely been closed”. “We are remediating issues more efficiently for our customers.”

Mr Chronican said NAB’s enforceable undertaking with Austrac was “progressing to plan”.

“The lessons learned from the royal commission and NAB’s own self-assessment into governance, accountability and culture continue to guide our approach to keeping the bank safe, protecting customers and innovating to be a leading financial services provider,” he said.