The National Australia Bank Ltd (ASX: NAB) share price will be on watch today.
This follows the release of the banking giant’s half year results this morning.
How did NAB perform in the first half?
As with the other banks that recently reported, NAB’s performance improved significantly during the first half of FY 2021.
According to the release, NAB reported cash earnings of $3,343 million for the six months ended 31 March. This was up 94.8% on the prior corresponding period. It is also a 35.1% increase if you exclude large notable items.
This was driven by earnings growth across its Personal Banking, Corporate & Institutional Banking, and New Zealand Banking businesses, which offset weakness in its Business & Private Banking segment.
Personal Banking reported cash earnings of $859 million, up 14.1% on the prior corresponding period. The segment benefitted from reduced credit impairment charges, home loan repricing, lower funding costs, and lower operating expenses.
The Corporate & Institutional Banking segment delivered a 15.7% increase in cash earnings to $782 million. This reflects improved outcomes across most key drivers and increased margins from risk and pricing discipline.
New Zealand Banking achieved a 9.6% increase in cash earnings to NZ$616 million. This was due to growth in lending and improved margins, combined with lower credit impairment charges.
Finally, the Business & Private Banking reported a 10.3% decline in cash earnings to $1,216 million. This reflects lower revenue due to low interest rates and higher operating expenses.
Asset quality improves
A key driver of its result was the writeback of a credit impairment charge of $128 million. This compares to a charge of $1,161 million in the prior corresponding period.
Management advised that this improvement reflects the partial release and non-repeat of forward-looking collective provisions for potential COVID-19 impacts and lower underlying charges.
Excluding forward-looking provisions, underlying charges reduced $447 million due to lower level of individual impairments and reduced charges for Australian retail exposures.
Pleasingly for investors that see the NAB share price as an income option, the banking giant has increased its dividend.
The bank’s board has declared a fully franked interim dividend of 60 cents per share. This is double last year’s interim dividend.
The NAB share price will trade ex-dividend for this on 13 May.