Investing.com - National Australia Bank Ltd (ASX:NAB) has reported a 7.6% increase in its annual statutory net profit, reaching A$7.41 billion. This growth has been attributed to the current high-interest-rate environment, despite the intense competition in Australia's mortgage market.
The bank has seen increased earnings from deposits and capital, thanks to higher interest rates. These conditions have enabled Australian lenders to expand their margins and benefit from increased borrowing costs.
NAB's annual net interest margin, a key metric showing the difference between the interest income generated by banks and the amount of interest paid out to their lenders, excluding operating costs, rose by 9 basis points to 1.74% on an adjusted basis.
However, the bank admitted to facing stiff competition in the home loan market and grappling with elevated wholesale funding costs.
CEO Ross McEwan stated that the high-interest-rate environment had positively impacted the FY23 results but noted that the benefits were increasingly being offset by fierce competition and inflationary pressures in the second half of the year.
The bank's earnings in the second half of 2023 were weaker compared to the first half, due to the impact of inflation and monetary policy tightening pressuring households.
NAB's cash profit for the year ending September 30 was $7.73 billion, up from $7.10 billion in the previous year. This figure fell slightly short of analysts' expectations of a $7.80 billion profit, as per Visible Alpha estimates compiled by Citi.
The bank reported a significant increase in its credit impairment charge (CIC) for the year, indicating volume growth and deteriorating asset quality. The CIC stood at $802 million in fiscal 2023, a significant increase from $125 million the previous year.
NAB announced a final dividend of 84 Australian cents per share, an increase from the 78 Australian cents per share declared a year earlier.