NAB Reports 8% Profit Dip Amid Rising Costs, But Margins Lift Share Price

National Australia Bank (NAB) reported an 8% decline in profit in the June quarter in the wake of soaring costs and rising competition driven by inflation.

However, despite the challenges, the bank's core operating margins boosted investor confidence, leading to a 1.5% increase in its share price by mid-session.

NAB, Australia's largest business lender and a major mortgage provider, revealed the bank's net interest margin holding steady despite the rise in the non-performing loans, which reached their highest number in the two years, Reuters reported.

While lenders can expect a stable profit, the troubled loans throw Australia's financial scenario into disarray. However, NAB's sustained growth in small business lending and stable NIM implied the bank was navigating the challenge with resilience.

Market pundits deem NAB's stable net interest margin as having the potential to weather a price war, triggering a 1.5% share rise as investors focus on core profit over loan quality concerns.

At least a 3% rise in the SME sector led to a 1% rise in NAB's lending balances in the June quarter, while the rise in house loans was only 1%. Asset quality declined, resulting in an impairment charge of AU$118 million, Capital Brief reported.

NAB is focusing on enhancing productivity and managing costs, aiming to save AU$400 million in FY24, while slashing the spending rate down from the previous year.

"While most customers are proving resilient, not unexpectedly we have seen asset quality deteriorate further in 3Q24," CEO Andrew Irvine said in a statement.

"Our strategy has served us well over recent years. As we build on this progress, our strategic priorities will evolve including an increased focus on delivering better service to customers and removing complexity across NAB."