The National Australia Bank Ltd (ASX: NAB) share price will be one to watch today.
This follows the release of the banking giant's full year results this morning.
NAB share price on watch following FY 2022 results
- Cash earnings up 8.3% to $7,104 million
- Statutory net profit up 8.3% to $6,891 million
- CET1 ratio 11.51%
- Net interest margin (NIM) down 6 basis points to 1.65%
- Exit NIM of 1.72%
- Fully franked final dividend of 78 cents per share
- Full year dividend up 18.9% to 151 cents per share
What happened in FY 2022?
For the 12 months ended 30 September, NAB reported an 8.3% increase in cash earnings to $7,104 million.
A key driver of this growth was the strong performance of its Business & Private Banking business. It reported a 21.5% increase in cash earnings to $3,013 million. Management advised that this was driven by higher revenue reflecting strong volume growth and higher margins, combined with lower credit impairment charges. These results were partly offset by higher operating expenses including additional bankers and resources to support growth, the impact of the LanternPay acquisition and investment in technology capabilities.
Also performing positively was its Corporate & Institutional Banking business, which reported a 34.9% increase in cash earnings to $1,628 million. This reflects higher revenue mainly from strong volume growth and higher margins, combined with lower credit impairment charges.
The New Zealand Banking business was on form and delivered a 14.1% increase in cash earnings to NZ$1,403 million. Once again, higher revenue, volumes, and margins drove this growth. This was partly offset by higher credit impairment charges and operating expenses.
Finally, NAB's Personal Banking business was a disappointment, reporting a 3.6% decline in cash earnings to $1,591 million. Management advised that this earnings decline primarily reflects the impact of home lending competition on margins.
In light of its overall earnings growth in FY 2022, the NAB board has declared a fully franked final dividend of 78 cents per share. This brought the bank's full year dividend to 151 cents per share, which is an increase of 18.9% year over year.
How does this compare to expectations?
Unfortunately for the NAB share price, this result appears to have fallen a touch short of expectations.
For example, according to a note out of Goldman Sachs, its analysts were expecting NAB to report cash earnings of $7,215 million and a final dividend of 77 cents per share.
It has missed on earnings but beaten on its dividend.
Management commentary
NAB CEO, Ross McEwan, was pleased with the bank's performance in FY 2022. He said:
Our FY22 results are pleasing. Compared with FY21, cash earnings rose 8.3% and all businesses contributed to underlying profit growth of 11.5%. This outcome reflects continued execution of our strategy including targeted volume growth and a disciplined approach to managing costs while investing for growth. After 11 years of interest rate reductions, earnings have also benefitted in FY22 from the rising interest rate environment.
McEwan also spoke positively about the bank's future. He commented:
Our strategy is long term, and is not dependent on any particular operating environment or economic conditions. It is centred around an enduring ambition to improve the outcomes for our customers and colleagues. We have made good progress over the past two years which positions us well for a changing environment. However, there is more we can do. We will continue to remain focused on the disciplined execution of our strategy to support sustainable growth in earnings and shareholder returns over time.
Though, he did warn that higher interest rates and inflation could cause some bumps in the road.
Despite improved FY22 asset quality outcomes, the potential impact of higher interest rates and higher inflation on the outlook is uncertain, with a wide range of plausible outcomes. To reflect this, collective provisions remain prudently set at 1.31% of credit risk weighted assets.
