AAP Finance

NAB’s Q3 profit fall can’t scare investors

By AAP Newswire

Investors believe National Australia Bank's seven per cent drop in third quarter cash profit was not as bad as feared, and have raised the bank's share price.

NAB's $1.55 billion cash profit was down on the same quarter last year, but investors pushed shares higher by 0.72 per cent to $18.14 at 1137 AEST.

In its 2020 third quarter trading update lodged with the ASX on Friday, NAB cited COVID-19 challenges and has money set aside for potential loan defaults.

"Encouragingly, about 16 per cent of home loan deferral customers ... have recommenced repayments," CEO Ross McEwan said.

"However, many customers still face an uncertain future. Where it makes sense we will offer them extra support to help manage through the pandemic, but providing further credit won't always be the right thing to do."

There were 92,000 home loan accounts with deferred repayments of $37 billion as of June 30.

This was slightly better than the May peak of 96,000 accounts worth $38 billion.

Pleasingly for the bank, about 70 per cent of customers with deferrals are more than three months ahead of their repayments.

However, there is cause for concern in other figures. About 20 per cent of customers with deferrals and NAB transaction accounts had suffered a more than 50 per cent loss in salary income since April.

Management said there had been only a slight increase in deferrals in Victoria. Melburnians are one week into six weeks of stage four virus restrictions, which has shuttered many businesses - particularly retailers - and left many people without work.

The bank has not increased provisions for COVID-related losses, but said there was ongoing review and there would be an update in its full-year results.

It also said its goal of keeping full-year expenses flat would be challenged by the pandemic, as it spends more on supporting customers.