NAB reports ‘modest deterioration’ in loans as it posts $1.9bn quarter profit

As Aussies battle spiking mortgage costs, one of the big four banks has reported a $1.9bn profit.

National Australia Bank has flagged a “modest deterioration” in loan quality but has still reported third-quarter earnings of $1.9bn.

The bank’s latest trading update released on Tuesday revealed that cash earnings were 5.8 per cent higher year-on-year but had declined 5 per cent compared to the December and March Quarters.

NAB has reported a “deterioration” in quality loans as interest rates bite businesses and consumers. Picture: NCA NewsWire / Glenn Campbell

“We know this environment is challenging for our customers, but pleasingly, most are proving resilient with only a modest deterioration in asset quality in the third quarter,” chief executive Ross McEwan said.

The number of loans more than 90 days overdue has increased by 0.05 per cent to 0.71 per cent, reflecting “a modest deterioration in delinquencies across the group’s home loan and business lending portfolios”.

That figure is still down considerably from its 1.13 per cent peak in the third quarter of 2021, but is the second time in a row that 90-day-plus arrears have grown.

Lending to small and medium businesses rose 4 per cent over the quarter but mortgages grew at 1 per cent, trailing the average of the other banks.

Meanwhile, gross loans and acceptances were broadly flat.

NAB’s net interest margin contracted by five basis points to 1.72 in the June quarter after it peaked in May’s trading update.

The bank argues that fall is a reflection of increased home lending compeition and higher deposits offset slightly by higher interest rates.

Also announced was a $1.5 billion share buy back over the next 12 months despite the deterioration in loan quality on the back of NAB’s strong level of capital.

“Capital levels remain healthy even after allowing for our latest on-market share buyback announced today. Liquidity and collective provision coverage are strong and we raised $37bn of term funding by end July,” Mr McEwan said.

Originally published as NAB reports ‘modest deterioration’ in loans as it posts $1.9bn quarter profit