According to the financial results for the year ending September 2016, housing lending steadily increased this year, going from a low of 0.2 times system growth in December 2015 to 1.2 times as at August 2016.
The bank saw housing lending volumes reach $273.9 billion for the year ending September 2016, with $108.9 billion coming from its retail, direct and small business channel, $88.2 billion from the broker channel, and $76.8 billion from NAB Business, corporate and specialised business and private wealth channel.
After releasing the financial results, NAB Group CEO Andrew Thorburn noted that, in personal banking, the bank had “made good progress in restoring home loan volume growth back to system levels after a period of significant change in pricing and credit policies”.
“When you look at the system growth, we had been below system and that was, for very particular reasons, around the investor segment and we decided at the same time to make quite a few policy and process changes,” Mr Thorburn said.
“We’re back around system now and we’re happy at that level.”
The banking group CEO said, however, that the bank did not want to “aggressively” chase market share growth “at this point in the cycle” because of “return [on equity] reasons”.
“It is a balance. We continue to work on acquiring customers, doing more with them – and that’s probably where the kicker is in terms of return – and being disciplined around all aspects of capital deployment including front book discount,” he said.
Funding costs showing signs of moderating
NAB’s group executive, finance, Gary Lennon, added that the front book has seen a lot of competition from other banks.
“Clearly this half was impacted largely by funding costs … it was also highly competitive. [There was] a lot of front book competition as well as competition around the back book and retention, so [the competition] was pretty fierce and tense this year,” Mr Lennon said.
However, he said that next year the bank will have “the benefit of [its] 15 basis point reprice in August”, which will act as a “tail wind”.
Meanwhile, Mr Thorburn said funding costs could be showing signs of moderating.
“We’ve seen some moderation in recent times on the front book discounting, but I think if you step back from it, the mortgage product is still a very positive ROE [return on equity] product … especially if you think of the other business we have with the client, credit cards, transaction, deposit accounts, superannuation etc,” he said.
“Sure, it’s been under pressure a bit but it’s still positive, and if you add in the other long-term relationships and other products and services, I think we are still positive about that product line.”
The financial results show that in Australia, 37 per cent of home loans came from NSW/ACT, 31 per cent were from Victoria/Tasmania, 17 per cent from Queensland, 5 per cent were from South Australian/Northern Territory and 10 per cent were from Western Australia.
Mortgages made up 47 per cent of the group’s New Zealand banking portfolio, with Auckland being the stronghold (45 per cent of all NAB’s home loans in New Zealand), followed by Canterbury (14 per cent), Wellington (11 per cent), Waikato (7 per cent), Bay of Plenty (6 per cent) and the remaining 17 per cent coming from ‘other’ areas of New Zealand.
Overall, cash earnings for the group were up 4 per cent to $6.48 billion, cash ROE was up 14.3 per cent, but statutory net profit came in at just $352 million.
According to the bank, the 94.4 per cent decrease in profit from last year reflects the “loss on sale” for both CYBG PLC (the holding company that owns Clydesdale Bank and Yorkshire Bank in the UK) and 80 per cent of NAB Wealth’s life insurance business (which sold to Nippon Life for $2.4 billion and completed on 3 October, but is captured in FY16 results).
However, even excluding these discontinued operations, statutory net profit for continuing operations decreased 5.6 per cent to $6.42 billion.
The final dividend is 99 cents per share fully franked, unchanged from the 2016 interim and 2015 final dividends.
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.