The National Australia Bank Ltd (ASX: NAB) share price is under the spotlight after the bank announced its FY23 result.
National Australia Bank share price
FY23 result
Here are some of the highlights for the result for the 12 months to 30 September 2023:
- Revenue increased 12.9%
- Total lending rose 3%
- Credit impairment charge of $802 million (up from $125 million in FY22)
- Net interest margin (NIM) improved 9 basis points (0.09%) to 1.74%
- Cash earnings increased 8.8% to $7.73 billion
- Statutory net profit after tax (NPAT) rose 7.6% to $7.4 billion
- Final dividend of $0.84 per share, up 7.7%
- Full year dividend of $1.67, up 10.6%
Despite the competitive environment and weaker economic conditions, NAB was still able to increase the size of the loan book.
The NIM – how much a bank makes on its loans compared to the cost of funding those loans (eg savings accounts) – benefited from higher earnings on deposits and capital as a result of the rising interest rate, but there was competition and higher wholesale funding costs.
Despite the higher interest rate environment, the ratio of loans that are at least 90 days overdue was only 0.75% (up from 0.66% in FY22). This figure was 0.93% in FY19, 1.03% in FY20 and 0.94% in FY21.
The dividend declared represents a cash dividend payout ratio of 67.7% of FY23 earnings, slightly lower than 68.4% in FY22.
Looking at the divisions – business and private banking cash earnings rose 10.1% to $3.3 billion, personal banking saw a 9.1% decline of cash earnings to $1.5 billion due to an increase in credit impairment charges, corporate and institutional banking saw a 14.9% rise to $1.9 billion and New Zealand banking saw an 8.5% rise in earnings to $1.5 billion.
Outlook for the NAB share price
The NAB CEO Ross McEwan said that the “economic transition” has further to go, but it’s well placed to navigate the environment.
NAB still sees attractive growth options, and productivity is helping it manage inflation pressures. It also has “prudent balance sheet settings”.
McEwan finished by saying “while the Australian economy is slowing, it is proving resilient. Our focus remains on managing NAB for the long-term to drive sustainable growth in earnings and shareholder returns over time”.
I think NAB is one of the best banks in Australia, and trades on a much more reasonable profit multiple valuation than Commonwealth Bank of Australia (ASX: CBA). It’d be my pick of the local banks.
