There’s a little bit of the Twilight Zone about National Australia Bank’s trading update for the June quarter.bang in line with what analysts expected, and good momentum in lending and deposit growth. Underlying revenue growth of 2 per cent was weaker than the 5 per cent growth ANZ delivered, but NAB isn’t chasing its tail in mortgages quite like the Blue Bank.
But NAB said its NIM actually fell slightly during the period, thanks to a combination of higher funding costs, intense mortgage competition and lower margins from the bank’s volatile markets and treasury division.This appears to have spooked the market, with NAB shares falling 3 per cent on Tuesday morning; the stock is essentially flat year-to-date.
Of course, rising rates are a double-edged sword for banks, and NAB chief executive Ross McEwan has been vocal in urging borrowers worried about mortgage stress to come forward early and seek help, whether that’s an adjustment to their loan repayments, fixing or splitting their loan, tapping their redraw facility, or plain old hardship assistance.NAB’s total credit impairment charge for the quarter was just $11 million, less than a third of the charge it took in the March quarter.
McEwan believes most of his customers can absorb higher rates, with about 70 per cent of home loan repayments ahead of schedule.Of course, the glass-half-empty view is that there are 30 per cent of customers living mortgage payment to mortgage payment – including a big chunk of borrowers set to shift from fixed rates to variable ones – in an environment where rates will end the year about 3 per cent higher than where they started it.