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National Australia Bank's Q1 profits tumble amid rising mortgage defaults

EditorOliver Gray
Published 21/02/2024, 10:31 am
Updated 21/02/2024, 10:31 am
© Reuters.

Investing.com - National Australia Bank Ltd (ASX:NAB) traded slightly higher on Wednesday morning after the company reported a 16.9% decrease in its cash earnings for the December quarter, falling to $1.8 billion. This decline is attributed to an economic slowdown and increased mortgage defaults, resulting in a $193 million impairment charge.

Despite the significant drop in profit, outgoing NAB CEO Ross McEwan maintained that the bank's Q1 performance was "sound" and exhibited "good momentum". McEwan is set to pass the reins to Andrew Irvine, the current head of the business bank, in April.

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NAB's net interest margin, a key profitability indicator, slightly increased in the three months leading up to December 31. However, the exact increase was not disclosed by the bank. This margin growth contrasts the Commonwealth Bank, which reported a 6 basis point drop to 1.99% in its margins during the second half of 2023, citing intensified competition in the deposit and mortgage sectors.

McEwan highlighted that the bank's cash earnings were only down 3% compared to the average of the second half of the 2023 financial year. He attributed this stability to the bank's disciplined growth approach during a highly competitive period and a focus on productivity to counter cost pressures.

The bank reported stability in its 90-day delinquency rates, which remained at 0.75% quarter-to-quarter, thanks to the improved performance of its New Zealand mortgages.

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