Source : THE AGE NEWS
By Clancy Yeates
National Australia Bank chief executive Andrew Irvine has warned that global economic uncertainty sparked by the Trump administration’s policies is likely to continue for some time, amid signs trade tensions are affecting the confidence of its business customers.
NAB, the country’s biggest business lender, highlighted the uncertain situation caused by escalating global trade tensions as it reported $3.6 billion in half-year profits on Wednesday.
National Australia Bank chief executive Andrew Irvine.Credit: Dominic Lorrimer
Irvine said Australia’s economy was probably through the worst of a weak patch, but the sense of uncertainty would continue for some time, and businesses appeared cautious about committing to taking on new debt in the current economic environment.
“The first few months of this year have witnessed pretty dramatic shifts in global economic policy. I expect unpredictability and volatility will persist for a while yet,” Irvine said.
“This uncertainty may be uncomfortable for businesses and for households, but overall, Australia enters this period in good shape.”
‘The first few months of this year have witnessed pretty dramatic shifts in global economic policy. I expect unpredictability and volatility will persist for a while yet.’
NAB chief executive Andrew Irvine
Irvine said the slowdown in inflation would open the door to interest rate cuts from the Reserve Bank, which would help to boost the confidence of households and business customers.
NAB economists are forecasting a super-sized 0.5 percentage point cut from the Reserve Bank this month, followed by 0.25 percentage point cuts in July, August, November and next February.
Irvine said Australia’s direct trade with the United States was low, but indicated be believed macroeconomic conditions and trade tensions were affecting business confidence, and business owners were being “thoughtful and careful” about committing to extra borrowing.
In its results, NAB posted a 1 per cent increase in cash earnings to $3.6 billion in the March half, and said it would pay an interim dividend of 85¢, in line with the second half of last year.
The profit result is slightly ahead of market expectations, and NAB shares were 3.5 per cent higher in late morning trade.
The bank’s revenue rose 1.7 per cent, helped by higher income from its markets trading businesses, while its net interest margin – funding costs compared with what it charges for loans – was flat.
A key focus for investors is whether more bank customers are struggling to meet their repayments, and NAB said its charge for bad loans of $348 million was slightly lower than in the second half of last year.
Another major issue for NAB is growing competition in the business lending segment, which attracts higher margins than mortgage lending, and is being targeted by NAB’s rivals. Irvine vowed to expand NAB’s business bank, as well as defending it, and pointed to its push to attract more deposits from business clients.
“In a nutshell, everyone else wants what we have, and we’re not going to give it up without one hell of a fight,” he said.
Morgan Stanley analyst Richard Wiles said, while NAB’s profits were higher than analyst estimates, the bank’s result had been supported by trading businesses – which tend to be more volatile – and cuts to provisions for bad debts.
“We believe NAB delivered a sound result. There are no surprises in underlying margin, credit quality or capital trends,” Wiles said.
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