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The National Australia Bank (NAB) has released its 2023 first quarter trading update, reporting lending and deposits both increased by 1 per cent for the three months to December 2022.
The big four bank said while it expected the slowing economy and rising interest rates would cause “difficulties for some customers”, most borrowers were well placed to deal with a tougher economic period ahead.
The results followed its rival Commonwealth Bank announcing it had funded less in home loans over the first half of the 2023 financial year than in 2022, despite profits lifting $5 billion.
Acknowledging the impact the higher interest rate environment will have on mortgage holders, NAB chief executive Ross McEwan said the hikes had “benefitted” its revenue this period.
The bank reported cash earnings lifted 18.7 per cent over the 1Q23 period compared with the 2H22 quarterly average to $2.15 billion.
The rising rate environment is “also causing economic growth and house prices to soften and loan repayments to increase”, Mr McEwan added.
“We know these changing circumstances, combined with cost of living pressures, will create difficulties for some of our customers, and we have a range of options available for those needing support,” Mr McEwan said.
He said the bank was in “good shape” to support customers through changing economic circumstances.
“We have started FY23 with a strong financial performance and our strategy is continuing to drive targeted growth across our business … including above system growth in Australian SME business lending,” Mr McEwan said.
“Overall though, continued strong employment conditions and healthy savings buffers mean most customers look well placed to manage through this period.
“We are investing to deliver simpler, more digital experiences for customers and colleagues and continue to target productivity benefits of approximately $400 million in FY23.
“Executing our strategy remains our key priority. We are focused on getting the basics right, maintaining cost discipline, managing our bank safely and improving customer and colleague outcomes to deliver sustainable growth and improved shareholder returns.”
In addition, it reported the loan payments past 90 days had decreased 4 bps to 0.62 per cent.
“This mainly reflects continued improvement across the Australian home loan portfolio, along with a continued low level of impaired assets in the business lending portfolio,” Mr McEwan said.
Banks front Senate inquiry into interest rates handling
Meanwhile, on the back of net profits, NAB alongside its rivals will be subject of a Senate inquiry into how banks set interest rates for savers and home loan borrowers.
The Australian Competition & Consumer Commission (ACCC) has confirmed the launch of its inquiry into how banks set interest rates for savers and borrowers.
The inquiry, which was called for by federal Treasurer Jim Chalmers MP, aims to consider how authorised deposit-taking institutions “set interest rates for savers, including differences in interest rate increases between bank deposits and home loans”.
[Related: CBA reports 18% drop in new mortgages]