NAB cash profits slide 37pc as bank takes hit from virus

National Australia Bank has revealed the extent of the financial damage caused by the coronavirus pandemic.

National Australia Bank says nearly 10 per cent of customers are yet to confirm if they will be able to resume loan repayments. Picture: David Clark

National Australia Bank has revealed the financial damage caused by the coronavirus pandemic, flagging nearly 10 per cent of customers are yet to confirm if they will be able to resume loan repayments.

Posting its financial results for the 2020 financial year on Thursday, the major bank reported cash earnings of $3.7 billion, a 36.6 per cent nosedive compared with the previous corresponding year.

NAB chief executive Ross McEwan said the operating environment within the country’s banking sector remained highly volatile, noting recent rate cuts by the Reserve Bank would place downward pressure on NAB’s revenue due to an expected reduction in interest income from loans.

“Our operating environment is evolving through the ongoing challenges and uncertainties associated with COVID-19,” Mr McEwan said.

Roughly 90 per cent of home and business customers who have accessed loan deferral support due to the pandemic confirmed they will be able to resume repayments following the tapering of the scheme.

Mr McEwan said a small proportion of customers that had accessed help would likely need ongoing support well into 2021.

“We don’t know yet at this stage those customers … are resuming or whether they will be able to,” he said. “We won’t know that for at least the next three months.”

NAB’s annual statutory profit was $2.6 billion for the 12 months ending September 30.

National Australia Bank chief executive Ross McEwan has revealed the extent of the financial damage caused by the coronavirus pandemic. Picture: Joel Carrett/ AAP

The head of Australia’s largest business bank added that stimulus packages were supporting the economic recovery.

“While economic activity has been materially impacted, the significant stimulus for households and businesses provided in the federal budget, combined with an expected more complete reopening of domestic state borders, provide a bridge to economic recovery as support is reduced,” Mr McEwan said.

The bank has issued a final dividend to shareholders of 30 cents per share a 64 per cent reduction on last year.

Credit Suisse investment analysts said the results were in line with their predictions, with the amount of bad debts 4 per cent lower than anticipated.

Credit impairment charges of $2.76 billion have also dragged down the bank’s performance. It has also set aside $1.86 billion in provisions relating to the pandemic.

NAB’s expenses rose 10.7 per cent, primarily related to costs associated with its operational overhaul strategy.

Mr McEwan noted additional costs during the year had been primarily associated with the pandemic, particularly in moving more than 90 per cent of the bank’s staff to remote working.