According to NAB’s half-year results for the period ending 31 March 2017, total balances for Australian home loans came in at $285 billion for the first half of the financial year, with more than three-quarters (76.3 per cent) of the mortgages being variable rates.
The results show that fixed rates have become more popular in Australia over the last year, with 15.1 per cent of borrowers opting for this type of mortgage – up from 13.2 per cent last year.
Owner-occupiers accounted for 57.7 per cent of mortgages in Australia, with investor home loans down marginally to 42.3 per cent (from 42.9 per cent last year).
Over in New Zealand, total balances for mortgages came in at $31 billion (or $NZ33 billion), with the majority being fixed rates (77.1 per cent, up from 75.7 per cent last year).
Variable rates dropped in popularity, accounting for just over a fifth of mortgages in New Zealand at the end of March 2017.
Interest-only loans were also on the up, accounting for more than a quarter of mortgages (25.2 per cent). This marked a 1.2 per cent jump from the same period last year.
Similarly to Australia, owner-occupiers were responsible for the greatest proportion of mortgages (62.8 per cent).
Brokers made good headway for the major bank in the first half of the year, with brokers in New Zealand writing 7.8 per cent of loans – a marked increase from the results in March 2016, when brokers were responsible for just 2.9 per cent of home loans.
In Australia, brokers were also writing more loans for the bank, accounting for $92.5 billion — or nearly a third (32.5 per cent) — of mortgages by March 2017, up from 31.3 per cent the year before. In parallel, the share of home loans coming through the direct channel fell from 68.7 per cent to 67.5 per cent.
The half year results revealed that on a statutory basis, net profit was $2.55 billion, compared to a loss of $1.74 billion for the March 2016 half year. The improved result primarily reflected reduced losses from discontinued operations.
Excluding discontinued operations, however, statutory net profit decreased 11.4 per cent.
Cash earnings were $3.29 billion, an increase of 2.3 per cent compared to March 2016 half year. Again, NAB highlighted that the main difference between statutory and cash earnings relates to “the effects of fair value and hedge ineffectiveness, and discontinued operations”.
The total charge for bad and doubtful debts (B&DDs) was $394 million, up $19 million or 5.1 per cent. The charge this period includes an increase in collective provision overlays of $89 million mainly for potential risks relating to the commercial real estate portfolio. The group’s total overlays for commercial real estate, agriculture, mining and mining-related sectors now stand at $291 million.
The consumer banking and wealth segment of the business saw cash earnings remain “stable” at $764 million, due to “higher funding costs, increased competition in home lending, and reduced wealth income”.
Speaking of the results overall, the NAB Group CEO Andrew Thorburn said: “Revenue is up, our asset quality remains sound and we have further strengthened our funding and capital positions…
“We continue to invest in creating a truly customer-centric culture at NAB, but we know we must do better to achieve a level of advocacy among customers that we can be proud of.”
In conclusion, Mr Thorburn said: “The operating environment for banks remains challenging, including heightened regulatory change, digital disruption and increasing stakeholder expectations. But Australia’s economic fundamentals provide a favourable backdrop including strong population growth and improving business conditions.
“In this environment, we are well placed to deliver for our customers and our shareholders.”
The interim dividend is 99 cents per share fully franked, unchanged from the 2016 interim and final dividends.
[Related: Zero growth in mortgage settlements in 2016]