The National Australia Bank Ltd (ASX: NAB) share price is under the spotlight after reporting its FY22 third quarter.
NAB’s Q3 performance
The big four ASX bank reported that it generated $1.85 billion of statutory net profit and $1.8 billion of cash earnings.
NAB’s quarterly cash earnings represented growth of 6%. Cash earnings before tax and credit impairment charges were up 10%.
NAB has completed the acquisition of Citigroup‘s Australian consumer business.
Excluding the Citi acquisition, NAB said its revenue increased by 2%, while expenses increased by 1% as it hired more people to support its growth. FY22 cost growth is now expected to be between 3% to 4%.
NAB said that its net interest margin (NIM) was slightly lower. But, excluding ‘markets and treasury’, the NIM was slightly up which reflected the benefit of a rising interest rate environment, partly offset by home lending competition and higher wholesale funding costs. The NIM measures how much money banks make on the lending (compared to the cost of the funding of the loan, such as savings accounts).
It also said that the bank’s common equity tier 1 (CET1) ratio was 11.6% at the end of the quarter.
Are NAB’s arrears rising?
The big four ASX bank said that the credit impairment charge was $11 million, reflecting “continued benign asset quality including low specific charges”.
NAB also said that the ratio of loans that were 90+ days past due and impaired declined by 5 basis points (0.05%) to 0.70%. That’s an improvement. NAB explained this mainly reflected “continued improvement” across the Australian home loan portfolio, along with a continued low level of impaired assets in the business lending portfolio.
Management comments
NAB said that the majority of its customers are well placed to manage the challenges of inflation and higher interest rates. NAB said that approximately 70% of customer home loan repayments are ahead of schedule.
The NAB CEO Ross McEwan said:
We have a clear strategy and executing this with discipline is our key priority. We will continue to focus on getting the basics right, managing our bank safely and improving customer and colleague outcomes to deliver sustainable growth and improved shareholder returns.
Summary thoughts on the NAB share price
Of the big four banks, I think that NAB is my preferred pick at the moment. It has seemingly done the right things to return to earnings growth. The management team seem to be an effective group.
However, with how large NAB is, it may not deliver that much growth from here. There are other, smaller, ASX dividend shares I’ve got my eyes on could deliver bigger total returns over time.
