In an echo of what its peers have reported for the year to September 30, The National Australia Bank says earnings bounced back strongly from 2020’s pandemic hit performance as lower bad and doubtful debt charges actual and prospective boosted returns.
The bank told the ASX on Tuesday that cash earnings jumped 148% to $6.364 billion for the 2020-21 financial year, slightly better than the $6.2 billion announced by Melbourne rival, ANZ and well ahead of Westpac’s $5.4 billion.
A final dividend of 67 cents will paid and with the interim of 60 cents a share, is well ahead of the regulator capped 60 cents for 2019-20, but well short of the $US1.66 a share paid for the pre-pandemic 2018-19.
Shareholders had the option during the year of taking up the $2.5 billion buyback which while using surplus capital, still left NAB with a top tier capital ratio of 13% against the regulator minimum of 10.5%.
Net interest margin fell to 1.71% from 1.77% in 2019-20.
Like its peers, the big driver was a lower loan impairment charge.
NAB said the credit impairment charge fell by $2.954 billion driven primarily by a $1.846 billion reduction in charges for forward looking provisions as a result of COVID-19.”
Excluding the forward-looking provisions, the bank said its underlying charges fell by $1,108 million “due to lower levels of individual impaired exposures and collective provision charges across the Group’s lending portfolio.”
In a statement with the results, chair, Phil Chronican said the bank is “encouraged by the 2021 full year results, which reflect good momentum across all businesses, capital strength and sound credit quality.”
“We are pleased to have increased dividends across the full year to 127 cents per share, compared to a reduced level in 2020. This outcome is closer to the level of shareholder return the Board is targeting going forward, with future dividends to be guided by a target payout ratio range of 65-75% of sustainable cash earnings, subject to circumstances at the time.
“The Board has set executive and employee remuneration outcomes for 2021 at a level which reflects the strong progress made in resolving legacy issues, the strategic repositioning of the business and major improvements to customer outcomes, evidenced by NPS and market share measures. This is in contrast to last year when the CEO and ELT did not receive any short-term incentive payments.
“Importantly, remuneration outcomes reflect an assessment of performance against the targets set in the 2021 financial year plan, as well as greater colleague engagement and better outcomes for customers.
“In a challenging environment, the bank provided flexibility and repayment relief to customers in need, while continuing to lend to businesses and homeowners to grow investment and support the broader recovery.”
Looking to the current financial year, Mr Chronican said he was “cautiously optimistic that the worst of the economic impact of COVID-19 is behind us and that the Australian economy will rebound to pre-COVID-19 levels by the middle of 2022.”
