Australia's NAB flags slowing lending growth from rising rates, shares fall

By Sameer Manekar

(Reuters) -National Australia Bank (NAB) on Wednesday warned that rising interest rates could impact credit demand in the current fiscal year, with further declines in property prices threatening its financial position.

The country's second-largest lender also warned that economic uncertainty created by rising interest rates owing to soaring inflation could challenge some customers, however, said it expects strong employment conditions and substantial home and business savings helping it weather the impact.

NAB forecasts a steep decline in business and housing lending volumes in fiscal 2023 in Australia, with business credit growth seen decelerating to 3.6% from 14.7% in fiscal 2022.

It also joined smaller rivals Westpac Banking Corp and Australia and New Zealand Banking Group in warning of higher costs from wages as a result of high inflation in fiscal 2023.

Shares of the Melbourne-based bank fell up to 2.7% to their lowest level since Oct. 18.

NAB, the country's biggest business lender, recorded strong growth in its business and home lending during the year ended September, with windfall benefit from rising interest rates boosting its cash earnings to A$7.10 billion ($4.62 billion).

That compares with A$6.56 billion reported a year earlier and analysts' estimate of A$7.08 billion, according to Refinitiv Eikon.

"This outcome reflects continued execution of our strategy including targeted volume growth and a disciplined approach to managing costs while investing for growth," Chief Executive Officer Ross McEwan said.

The bank's stressed loans, interest payments on which were delayed for over 90 days, fell to 0.66% in fiscal 2022 - lowest level since fiscal 2015 - from 0.94% in 2021.

Net interest margin, a key metric of profitability, rose 1 basis point to 1.65% on an adjusted basis. It declared a final dividend of 78 Australian cents per share, bringing the total dividend to 151 cents apiece, a 19% jump from a year ago.

($1 = 1.5380 Australian dollars)

(Reporting by Sameer Manekar and Harish Sridharan in Bengaluru; Editing by Shailesh Kuber and Rashmi Aich)