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Less than 1 in 5 NAB borrowers ditches deferrals

Almost 80 per cent of NAB customers on mortgage repayment deferrals opted to maintain existing arrangements following the bank’s “check-in”.

NAB has published a third quarter trading update for the 2020 financial year (3Q20), revealing that as of 30 June, approximately 92,000 mortgage customers were on repayment holidays, representing $32 billion in loans or 12.3 per cent of the bank’s home loan portfolio.

This is down from a peak of 96,000 mortgage customers in May ($38 billion), representing 12.7 per cent of its portfolio.

According to NAB, just 16 per cent of deferral customers opted to resume repayment following the bank’s three-month check-in, with 78 per cent maintaining existing arrangements.

However, the share of NAB’s customers exiting deferral arrangements was double that of the overall market (8 per cent), as reported by the Australian Prudential Regulation Authority (APRA) earlier this month.

Meanwhile, just 5 per cent of mortgage deferral customers requested a switch to interest-only (IO) repayment terms, while 2 per cent were referred to the NAB Assist team.  


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Owner-occupied loans represent approximately 56 per cent of mortgage deferrals compared with 44 per cent of investor loans.

Borrowers with principal and interest (P&I) repayment terms represent the vast majority (86 per cent) of deferred home loans across NAB’s portfolio

Approximately 40 per cent of mortgage customers on repayment holidays are from NSW, followed by Victoria (32 per cent), Queensland (16 per cent), Western Australia (8 per cent), and South Australia and the Northern territory (4 per cent).

Mortgages with a loan size exceeding $500,000 make up 51 per cent of overall deferrals, despite representing 40 per cent of NAB’s total portfolio.

Home loans with an LVR exceeding 80 per cent have also been overrepresented, making up 19 per cent of deferrals but 15 per cent of NAB’s mortgage book.  

NAB’s bottom line

NAB has reported unaudited cash earnings of $1.5 billion, down 7 per cent from 3Q19.

The result was impacted by a sharp increase in COVID-related credit impairment charges.

A 10 per cent increase in the major bank’s operating revenue was offset by a 2 per cent rise in expenses.

NAB CEO Ross McEwan acknowledged that the outlook remains uncertain, but noted that the bank would continue to explore investment opportunities.

“The COVID-19 pandemic continues to challenge our customers and our bank, with various impacts across industries and communities,” he said.

“The outlook remains highly uncertain, but decisive actions in April to strengthen our balance sheet allow us to support customers while keeping our bank safe.”

He continued: “Our 3Q20 result is reflective of the current operating environment, characterised by volatile markets, subdued credit demand, low interest rates, cost pressures and deteriorating asset quality.

“In navigating these near-term challenges, we have not lost sight of the need to invest for NAB’s long-term future.”

Mr McEwan concluded: “We have a clear plan for NAB, and we’re getting on with it, including quickly embedding our new operating model and creating clear accountabilities.

“We are investing in our colleagues and executing fewer, more important projects. This will make a real difference to how well we serve customers and drive sustainable performance.”

[Related: AMP Bank earnings sink 30%]

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