The National Australia Bank Ltd (ASX: NAB) share price is on watch this morning after reporting its FY21 half-year result.
NAB HY21 report
The big four ASX bank reported that it generated $3.34 billion of cash earnings for the half, this was up 94.8% year on year.
The cash profit measure showed 35.1% growth year on year when excluding the large notable items in the first half of FY20 ($91 million of customer remediation and $668 million of a capitalised software policy change).
Statutory net profit came in at $3.21 billion.
NAB explained that revenue increased 1%. There was improved markets and treasury income, offset by lower margins.
Talking of the net interest margin (NIM), that declined by 4 basis points to 1.74%. Excluding markets, treasury and large notable items, the NIM dropped 2 basis points. NAB told investors this reflects a lower earnings rate on deposits and capital due to the low interest rate world we’re living in. There was also competitive pressures, partly offset by lower funding costs and home loan repricing.
Expenses decreased 18.6%. Excluding large notable items, in the first half of FY20, expenses rose 3.1% mainly reflecting provisions for higher performance-based compensation and additional customer facing and support roles, partly of productivity gains. However, compared to the second half of FY20, expenses fell 1.8%.
A helpful part of this result was an impairment write-back/benefit of $128 million compared to a charge of $1.16 billion a year ago. However, the ratio of loans 90+ days past due continue to climb – rising to 1.23% in this half, up from 1.03% in the second half of FY20 and 0.97% in the first half of FY20.
NAB dividend and balance sheet
NAB revealed that its common equity tier 1 (CET1) ratio increased by a further 90 basis points to 12.37% over the six month period.
This strong balance sheet position allowed the bank’s board to declare a fully franked dividend of 60 cents per share, double the size of HY20 and the same as the entire FY20 dividend.
Outlook for the NAB share price
NAB CEO Ross McEwan said:
“Australia’s economic recovery is unfolding at a brisk pace and indicators point to ongoing strength in activity and the labour market. In-particular, record high levels of business conditions and forward orders combined with strong business confidence and increasing capability utilisation should drive a pick-up in business investment and further jobs growth. This suggests that, in aggregate, the economy is well placed to absorb the winding up of jobkeeper at the end of March despite some sectors remaining challenged.”
Summary thoughts
It’s good to see that NAB is going through a recovery, particularly with the dividend. The NAB share price has already recovered a long way, so I’m not sure if it’s worth pursuing now as a new investment with the business already a powerhouse in the sector.
However, there may be other ASX dividend shares that can offer a combination of income and good capital growth.
