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Australia’s NAB Sees Profit Exceed Estimates But Warns On Margin Pressures – Cryptovibes.com – Daily Cryptocurrency and FX News

National Australia Bank


Summary

  • FY21 earnings of A$6.56 bln vs Refinitiv consensus of A$6.43 bln
  • NIM down 6%, flags net margin ‘headwind’ in FY22
  • Shares slid 1.5% on profit-taking
  • Introduces oil & gas lending caps in response to activist groups

On November 9, 2021, National Australia Bank (NAB.AX) Tuesday beat earnings estimates as lower pandemic-related provisions helped profit jump more than three-quarters, but at the same time flagged continuing pressure on lending margins and its shares slid.

Posting above-average growth in home and business lending, Australia’s second-largest lender said its “optimism about the future” was reflected in a dividend of 67 Australian cents a share, more than double last year’s payout.

A Refinitiv estimate of A$6.43 billion was beaten by the lender’s cash profit of A$6.56 billion ($4.85 billion) for the year ended September 30. To soak up the COVID-19 pandemic fallout, the bank released A$217 million of the provisions that it had set aside.

The huge rise in home prices and the rebound of the Australian economy from the coronavirus pandemic has been driven by the extremely low-interest rates. However, they have also hurt bank margins – driving a 28% slide in NAB’s markets income for the year.

As NAB shares fell 1.5%, its big banking peers were between half and one percent lower. The chief investment officer at Ausbil Investment Management, Paul Xiradis, stated:

“We did see a little bit of margin contraction  … but I think it was a very credible result. Reaction initially was taken positively and I think what we are seeing now is a bit of profit-taking.”

This financial year – with markets pricing a hike to Australia’s record low-interest rates by July – NAB expects to earn more from its interest-earning portfolio but stiff competition will mean the pressure on margins would continue. The Chief Financial Officer Gary Lennon told analysts in a call:

“There are net (margin) headwinds for next year. This year we managed to essentially net them off … I think that will be difficult for 2022, but I also don’t think it’ll be a disaster scenario.”

Largely driven by its holding of low-yielding assets, NAB’s net interest margin NIM, a key measure of bank profitability, was 6 basis points lower to 1.71% for the year.

Last week, investor anxiety regarding margin pressures facing Australia’s big four banks was fueled by smaller rival Westpac Banking Corp (WBC.AX), revealing it had to take a big margin hit to grow its mortgage business.

OIL & GAS CAPS

Environmental activists are targeting NAB for continuing to finance gas projects in Australia. It said on November 9 that it would limit its “direct” funding to projects that play a role in national energy security.

Despite the bank also saying that it would not directly finance greenfield gas extraction projects outside Australia, it still would continue to finance integrated liquified natural gas in Australia, New Zealand, Papua New Guinea, and other selected regions.

By 2025, it would cap oil and gas exposure at $2.4 billion and a reduction thereafter to be aligned with goals set out by the International Energy Agency (IEA) by 2050.

Chief Executive Ross McEwan said:

“We’ve had a number of very strong activist groups say to us, we want you to abide by the IEA. Actually, we think that’s the right thing to do and that’s what we’ve actually done.”

Activist group Market Forces, however, criticized the bank on Tuesday saying the “direct” reference in its new policies kept a loophole that allowed it to fund the companies running ‘dirty’ projects even if not the projects themselves.

The bank’s offices in Sydney were also targeted by Extinction Rebellion protesters on Tuesday, writing “greenwash in progress” on its windows.

In a call from Melbourne McEwan told reporters:

“We have no intention of being involved in any greenwashing whatsoever. Our intent is to participate in helping Australia get into a much better position from a carbon emissions perspective.”

($1 = 1.3517 Australian dollars)



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