First-half results show lower earnings but SME lending up 8.6%
Despite a challenging environment and subdued home lending growth of 3.7%, NAB said it remained optimistic about the future following the release of its half-year results for 2024.
The big four bank’s cash earnings fell by 3.1% to $3.548 billion in 1H24, down 3.1% compared to the second half of 2023 and 12.8% lower than 1H23.
NAB’s Group Common Equity Tier 1 (CET1) ratio fell seven basis points from September 2023 to 12.15%.
The bank, which released its 2024 half year results on May 2 via its website, performed well when it came SME business lending, up 8.6% over the year to March 2024, while customer deposits were up 6.4% in personal banking and business and private banking.
An interim dividend of 84c per share was declared, which equates to $2.6bn being delivered to shareholders.
NAB CEO Andrew Irvine buoyant about performance
NAB Group CEO Andrew Irvine (pictured above) said the bank’s performance reflected the consistent execution of NAB’s strategy in a challenging environment.
“Our strategy over the past four years has served us well and we are a simpler bank focused on getting the basics right,” said Irvine, who also discussed the results in a video (see below).
“I’m one month in as Group CEO and I have been spending my time meeting with many customers and colleagues across Australia and New Zealand. What I have heard reinforces what I had experienced in my four years at NAB.
“That is, NAB is a good bank that is getting better because we have 38,000 colleagues who want to provide the best service to our customers every day. We have a leadership group who are executing a strategy that is working.
“We also have the right mix of businesses allowing us to make choices about where to invest and grow.”
Irvine said the disciplined execution of NAB’s strategy had “helped us manage the impacts of slowing economic growth and competitive pressures while also absorbing a higher effective tax rate”.
“Compared with a very strong 1H23 result, cash earnings were 12.8% lower, but the decline was more modest versus 2H23, down 3.1%,” he said.
“Consistent investment in our better returning segments is supporting good growth over the 12 months to March 2024. In other areas where returns are less attractive, a selective approach has resulted in more subdued growth including 3.7% in Australian home lending.”
NAB said overall revenue fell 3.7%, softening from strong 1H23 levels as the benefits of a higher interest rate environment had been more than offset by competition. “At the same time, cost pressures remained elevated,” the bank said.
Irvine said staying safe and having prudent settings were non-negotiables for NAB.
“Our CET1 ratio is above our target range, supporting a $1.5 billion increase in our on-market share buy-back. Liquidity and provisions remain strong and our FY24 term funding task is well progressed with $23 billion raised in 1H24.”
Irvine said NAB was proud of it progress but there was more to do.
“We need to do better for customers and become even simpler while continuing to remove complexity across our bank.
“While our strategic priorities will evolve, customers will remain at the centre of everything we do and there will be no change to our unwavering focus on accountability and execution.
“We remain optimistic. Our bank and most customers are in good shape and the outlook for the Australian economy remains resilient. We are well placed to continue managing our business for the long term.”
Key NAB half-year results
Releasing its half year results on Thursday, including an ASX announcement, NAB’s key 1H24 data included:
- $3.494bn statutory net profit
- $3.548bn cash earnings – down 3.1% vs 2H23, down 12.8% vs 1H23
- 11.7% cash return on equity (ROE)
- 12.15% group common equity Tier 1 CET1) ratio
- Home lending increased 3.7%
- Business lending up 8.6%
- Deposit growth up 6.4%
- Credit impairment charge $363m, compared to $393m in 1H23
- Revenue down 3.7%
- New Zealand banking business (BNZ) – cash earnings of $750m, up 7.7%
Economic outlook – Australia
The 1H24 report also provided some analysis on the Australian economy.
NAB said household consumption growth slowed sharply in the second half of 2023, impacted by interest rates and cost of living pressures.
“This is weighing on real GDP growth which is expected to remain below-trend over the near term. However, some relief is anticipated later this year with expected tax cuts and a forecast easing in monetary policy from November should inflation continue to moderate.”
Following 1.5% GDP growth over 2023, growth of 1.7% is forecast over 2024, before improving to around 2.25 % in 2025.
NAB said pressure had eased in the labour market and wage growth was expected to slow from elevated rates in 2023.
“The unemployment rate is expected to continue to drift higher, peaking at around 4.5% by end 2024, but most indicators of labour demand remain healthy suggesting employment will continue to grow.”
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