NAB reveals FY24 results as bank pledges better times ahead for borrowers

National Australia Bank chief Andrew Irvine says Australia is “at the toughest point in the economic cycle” but says there is “light at the end of the tunnel” for nervous borrowers.

The bank revealed its 2024 financial year results on Thursday as it forecast a moderate drop in interest rates, with a cut in either February or March, and along with tax cuts Mr Irvine is “optimistic that next year will be better than this”.

Mr Irvine said he did “worry about a global trade war” under US president-elect Donald Trump and hoped that rhetoric would not match the reality.

In delivering a six per cent drop in full-year earnings to $6.96 billion, the bank chief called out the strength of business lending over the year, saying that there had been double-digit growth for much of the year as companies took on more debt to expand. Business lending over the full year grew by $48 billion, or 8 per cent.

“That’s a damn good number,” Mr Irvine said.

The figures also reveal that household and small business mortgage pain is starting to moderate. A total of 14,500 customers were offered hardship in the September quarter compared to 8100 at the same time last year. That number had grown each quarter up until this one, where those receiving help stayed flat.

The results highlighted the two-speed nature of Australia’s economy, with resource-rich WA, Queensland and the Northern Territory performing better than the south-eastern states. Victoria in particular was struggling, Mr Irvine said.

“Sectors that are more skewed to domestic retail and discretionary spending are starting to feel it as consumers have had to tighten their belts and budget hard to stay afloat,” he said.

He said he was pleased to see many exporters had diversified their market mix following the banning of exports to China during COVID and said many were “better placed today ... than four or five years ago” in the event China’s economy was curtailed by US tariffs.

The full-year results were primarily affected by NAB opting out of a mortgage price war in the first half of the financial year, as rival lenders competed for market share. That decision not to compete, or accept poorer margins is a core factor in the bank delivering a 20 per cent fall in cash earnings in the personal bank to $1.17b.

The bank has been seeing that pressure come off — read the mortgage wars have come to a stalemate — and the loan business was growing again.

“In the back half of the year, pricing has gone back above the cost of capital, so now we’re meeting the market,” Mr Irvine said.

Loan arrears up

Customers receiving hardship may have stabilised, but NAB is still seeing a rise in arrears across the business, rising to its highest level since 2023 at 1.39 per cent.

The “tougher macroeconomic environment” meant the bank’s household and business divisions were seeing an increase in non-performing loans. The hardest hit were construction, agriculture and businesses linked to discretionary spending. Consumer push-back on rising food costs was rippling along the supply chain.

“We are seeing growing stress in supply chains, particularly related to the food industry. This is impacting customers in manufacturing, wholesaling, transport, restaurants and pubs,” NAB’s chief financial officer Nathan Goonan said.

A number of larger business failures across sectors like manufacturing impacted the loan book, and Mr Irvine said he had found such failures were “lumpy” and not a sign it would be replicated down the track.

House prices staying steady remained key to the bank’s future outlook for loan impairments. While the hoped-for interest rate relief and tax cuts should improve the financial position of borrowers in arrears, Mr Goonan said the bank still expected to see a moderate rise in mortgagees struggling to make payments.

“We are here to help customers who need support,” he said.

The company declared a dividend for the half of 85 cents per share, for a full-year pay-out of $1.69.