URGENT UPDATE: NAB, Australia’s leading business-focused bank, has reported a slight decline in cash earnings, revealing that bad debts are on the rise as some businesses struggle to meet loan obligations. For the year ending September 30, 2024, NAB announced cash earnings of $7.09 billion, down 0.2 percent from the previous year.
In a critical announcement made Thursday, NAB’s statutory net profit fell by 2.9 percent to $6.76 billion. While underlying profit saw a marginal increase of 1 percent, the bank took a substantial charge of $833 million on debts deemed unlikely to be repaid. This reflects a significant increase of 14.4 percent from the $728 million reported last year.
CEO Andrew Irvine highlighted concerns regarding the deterioration in the bank’s business lending portfolio, particularly among a select group of corporate customers and operations in New Zealand. “While single loan exposures are lumpy and hard to predict, it’s not unusual to see some increases in impairments towards the end of an asset quality cycle,” Irvine stated during a briefing with analysts.
NAB has also reported stability in Australian mortgage arrears over the past year. However, the bank noted that 1.55 percent of its lending portfolio is now classified as “non-performing,” an increase from 1.39 percent a year ago. The bank indicated that conditions improved in the second half of the 2024/25 financial year as inflation pressures eased.
In response to the challenging economic climate, NAB remains committed to supporting its customers through these difficulties. “Whilst this can take time, in our experience, this achieves the best overall result for our customers and our shareholders,” Irvine added, emphasizing the bank’s proactive approach.
In light of these developments, NAB declared a final dividend of 85 cents per share, raising its total dividends for the year to $1.70—a slight increase from $1.69 the previous year. This move aims to reassure shareholders amidst rising concerns over business debts.
As NAB navigates these turbulent waters, analysts and investors will be closely monitoring the bank’s strategies to mitigate risks associated with rising bad debts. The urgent focus will be on how effectively NAB can adapt to changing economic conditions and support its clients moving forward.
