(Reuters) – National Australia Bank on Thursday reported a decline in annual cash profit, largely in line with market expectations, as the country’s second-largest lender grappled with intense home-lending competition and escalating deposit costs.
The lender said credit growth in the country is expected to slow over 2025 and 2026, suggesting a cooling in demand for loans and increased competition among banks for a smaller pool of borrowers.
NAB’s business banking division, which accounts for about 45% of the lender’s earnings, grew customer deposits by A$14.5 billion and business lending by A$11.7 billion during the year.
Profits at the bank’s personal banking division, which analysts said has been growing below the industry average for the last six months, fell 19.6% to A$1.17 billion during the year.
With interest rates at a 12-year peak of 4.35%, Australian banks face rising costs as depositors move funds into savings accounts paying more attractive rates and borrowers struggling with loan repayments and elevated loan costs.
“While moderating inflationary pressures are encouraging, this is happening gradually meaning cash rate cuts are unlikely before February 2025,” NAB said in a statement.
The bank’s share of troubled loans grew by 26 basis points (bps) to 1.39% this year, mainly because more Australian homeowners are falling behind on mortgage payments and various businesses are struggling to repay their loans.
“In Australian housing, our growth was sub-system at 3% as we balanced growth against competitive pressures,” NAB said.
Australia’s top business lender as well as a top-tier mortgage provider said cash profit came in at A$7.10 billion ($4.66 billion) for the year ended Sept. 30, compared with A$7.73 billion last year and a LSEG estimate of A$7.07 billion.
Net interest income fell by 0.3% to A$16.75 billion from A$16.81 billion a year ago, while net interest margin – a key gauge of profitability – declined 3 to 1.71%.
The bank declared a final dividend of 85 Australian cents apiece, up from 84 Australian cents a year ago.
($1 = 1.5232 Australian dollars)
(Reporting by Roushni Nair in Bengaluru; Editing by Shailesh Kuber)
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