Cash earnings slightly down amid rising expenses
Irvine’s comments on energy came as NAB shares fell 3.5 per cent after full-year profit fell 0.2 per cent to $7.1 billion. NAB’s annual report also showed that Irvine received a $1.7 million bonus in his first year on the job, making his total salary $7.6 million.
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One focus for investors was the business bank, NAB’s largest division, where profits rose 1.6 per cent. Sydney-based rivals Commonwealth Bank and leading retail banks Westpac have targeted business banking as mortgage yields come under pressure.
NAB said its market share in commercial loans had increased, but its margins remained low throughout the year and bad debt charges increased.
Hugh Dive, chief investment officer at Atlas Funds Management, said it was “not a bad outcome” from NAB but with the share price being as high as it has been recently, the margin for error was very small. He also questioned whether competition was starting to affect NAB’s commercial bank.
“Sydney banks [Westpac and CBA] Starting to eat into Melbourne banks’ core business? “It looks like it,” he said.
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Citi analyst Thomas Strong said NAB’s bad and doubtful debts were above market expectations and investors would likely focus on this trend. He noted that the market may also be concerned about NAB’s guidance on next year’s cost increases, describing it as “a bit of a soft result overall”.
Overall, NAB’s revenue rose 2.9 percent, helped by loan growth and widening margins, but the bank’s loan impairment charges also rose as business customers, in particular, faced financial difficulties. Expenses increased by 4.6 percent as profits decreased slightly; This increase includes a previously announced $130 million charge due to underpayment of wages and employee benefits.
In its outlook, NAB predicts economic growth will be 2 percent this year and 2.3 percent next year, and Irvine said the Reserve Bank’s decision to keep interest rates unchanged this week was a sign that the economy was “doing somewhat well.”
“The economy is growing and growing at almost full capacity, frankly, without creating a lot of inflation,” Irvine told reporters.
Alongside his comments on energy, Irvine reiterated that housing was “Australia’s biggest social and political issue” and that it was crucial for the nation to increase its housing supply.
He also called for a focus on “reducing complexity and bureaucracy for businesses”, a long-standing priority for big business, and said the country should prioritize giving Australians the opportunity to make the most of artificial intelligence.
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