Home loan arrears ticking up: NAB

National Australia Bank (NAB) has released its trading update for 1Q24 (ended 31 December 2023), revealing that while 90-plus day arrears have remained stable compared to the previous quarter (ended 30 September 2023), home loan arrears are rising.

According to the results, released on Wednesday (21 February), the percentage of mortgages 90-plus days in arrears and gross impaired assets compared to gross loans and acceptances was 0.75 per cent for NAB’s 1Q24, which has remained the same since 4Q23.

However, the major bank noted that this number reflected an increase in Australian mortgages, which was offset by an improvement in New Zealand’s business lending portfolio.

Moreover, NAB reported that arrears have been steadily rising since 1Q23, which reported 0.62 per cent of mortgages were 90-plus days in arrears.

The uptick came as more borrowers roll off their super-low fixed rates onto much higher variable rates – and as variable rates increased over the period following the cash rate increase.

The major bank’s 1Q24 also showed that the major bank’s credit impairment charge (CIC) was $193 million, a rise from $165 million in 4Q23, as a result of the rise in arrears in Australian home lending in conjunction with a growth in business lending volume.

NAB’s net interest margin (NIM) also reduced “modestly” (when excluding markets & treasury and the impact of liquids) as deposit costs rose and residential lending became more competitive. The major bank said this was offset, in part, by increased earnings on capital.

According to NAB, its lending balances increased by 1 per cent, including a 2 per cent growth in SME business lending and a 1 per cent increase in residential lending. It has not provided figures on what these lending balances represent.

Speaking following the 1Q24 update, the outgoing chief executive of NAB, Ross McEwan, said that “the Australian economy remains resilient” despite economic growth slowing.

He also stated that “the majority of our customers are faring well”.

He continued: “We continue to be optimistic about the outlook and our bank is in good shape as Andrew Irvine transitions to CEO over coming months. Improving customer and colleague outcomes remains our key focus to deliver sustainable growth and improved shareholder returns.”

Other major banks have also noted an increase in 90-plus day arrears, as Westpac reported an increase from 0.86 per cent to 0.95 per cent over the previous quarter. CommBank has seen a less significant increase, with arrears rising from 0.47 per cent to 0.52 per cent in the half year ended 31 December 2023.

[Related: Most mortgagors are still ahead on repayments: Westpac]