National Australia Bank Limited · ASX:NAB
National Australia Bank — Debt Investor Presentation (May 2020)
64 slides from National Australia Bank's debt investor presentation, May 2020
Slide 1: May 2020
May 2020 © 2020 National Australia Bank Limited ABN 12 004 044 937 (NAB or the Company). NAB Group is NAB and its controlled entities. National Australia Bank
Slide 2: Sound underlying performance but COVID-19 impact at Group level
Sound underlying performance but COVID-19 impact at Group level Outlook impacted by unprecedented environment Decisive action for uncertain times ahead Rapid response to support customers and colleagues Focused on future opportunities
Slide 3: 1H20 earnings and divisional results
($m) ($m) 5,110 4,697 1,378 1,378 3,266 2,471 657 699 727 701 2,104 523 562 1,313 Statutory profit Cash earnings (ex large Underlying profit (ex large Business & Private Consumer Banking Corporate & New Zealand Banking notable items) notable items) Banking Institutional Banking 2H19 1H20 2H19 1H20 (
Slide 4: Economic conditions and COVID-19 impact
• (%) • 5,368 5,481 • 2,692 2,789 • FY16 FY17 1H17 2H17 Total revenue (1) Source: NAB Economics – Mar-20 onwards represents forecasts (2) Represents change in payment inflows by industry for the month of April 2020 compared to April 2019. April 2020 data extrapolated based on actuals to 19 April 202
Slide 5: Collective provision balances
• • • • Collective provision balances ($m) • 4,401 • Economic 3,360 807 Adjustment top-up 3,054 3,249 641 662 (COVID-19) of • 581 614 $807m 2,719 2,932 2,473 2,635 • Total EA balance $1,473m, 33% of CP • Sep 18 Mar 19 Sep 19 Mar 20 • (1) Assumes $3bn placement and $500m raised under share purchase p
Slide 6: Funding indices
($bn) • • • • • • ($bn) 91% 93% 93% 96% 86% 90% 20% 22% 24% 23% 24% 20% 66% 70% 69% 69% 70% 72% Sep 12 Sep 14 Sep 16 Sep 18 Sep 19 Mar 20 Customer Funding Index Term Funding Index (1) Quarterly average (2) Excludes Additional Tier 1 6
Slide 7: Rapid response to support customers and colleagues
81% working remotely 811 front line (> 32,000 Group headcount) reassignments2 • • • Credit Card & Personal Loan accounts2 (1) All figures as at 17 April 2020, includes BNZ unless otherwise stated (2) Excludes BNZ (3) Excludes NAB branded Interest Only home loans, temporarily unavailable due to autom
Slide 8: Customer support and government response
• • • • • • • • • • • • • • • • • • (1) As at 7 May 2020 (2) Information taken from the Australian Government Federal Treasury, ‘Economic Response to the Coronavirus’
Slide 9: Technology and cloud migration
• • • • • • • • • Applications migrated to cloud Sourcing of technical FTE 33% • 65% 49% 19% 8% 35% 51% 3% FY17 1H20 2H18 1H19 2H19 1H20 Insourced Outsourced (1) Includes all NAB and BNZ headcount (2) Australian Business and Consumer operations, excludes Corporate & Institutional and BNZ (3) Example
Slide 10: Software capitalisation policy change
($m) 775 • Minimum threshold at which software is to be 66 capitalised increased from $2 million to $5 million 325 • Reflects a change in approach to managing projects 261 which is intended to uplift business accountability for 709 293 0 46 91 projects less than $5 million 261 279 202 • Policy chang
Slide 11: Net interest margin and replicating portfolio
• 0.03% (0.02%) (0.01%) 0.0% • 1.79% 1.78% 1.78% 1.78% • Mar 19 Sep 19 Lending Funding Capital & Mar 20 Ex Markets & Mar 20 • Margin & Liquidity Other Markets & Treasury Treasury • – % Average return of replicating portfolio FY18 FY19 1H20 1.76%
Slide 12: Expense growth and productivity
($m) HoH expense growth 0.4% (PCP 1.6%) (135) 164 (108) 69 10 18 4,055 4,100 4,118 Mar 19 Sep 19 Productivity Remuneration Technology and Depreciation and Wealth Other Mar 20 savings increases investment Amortisation • 2,057 net reduction (3,659) • 33,422 35,245 • • FY17 Productivity Upskilling/ Tem
Slide 13: Digital adoption
(m) 363 338 319 287 63% 265 51% 41% 31% 1H18 2H18 1H19 2H19 1H20 FY17 FY18 FY19 1H20 • Virtual Assistant Live Chat (k) (k) 191 84 142 116 54 • 1H19 2H19 1H20 2H19 1H20 (1) Simple consumer product sales includes the opening of savings and transaction accounts, personal loans and credit cards across a
Slide 14: Digital applications and customer NPS
(m) 3.0 2.6 33 34 34 2.1 28 1.5 21 21 0.8 1H18 2H18 1H19 2H19 1H20 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 # Applications 2Q20 Growth 24 6,083 6,612 6,791 5,647 4,308 13 12 2,483 5 3 3 2H18 1H19 2H19 1H20 1Q20 2Q20 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 (1) Net Promoter® and NPS® are registered trademarks
Slide 15: Strategic priorities
Clear market Disciplined Simple Grow in Personal New customer leadership1 growth & digital & SME acquisition Core of the Highly professional Radically simpler Simpler, more New propositions NAB Group relationship with digital-first focused bank driving customer managers and propositions acquisition
Slide 16: Housing
National Australia Bank HOUSING
Slide 17: Australian housing portfolio
60% ($bn) 50% 34 40% 30% 20% 304 302 10% 0% LVR LVR LVR LVR LVR Sep 19 New fundings Interest & Pre- External refinance Mar 20 ≤60% 60.01% - 70% 70.01% - 80% 80.01% - 90% >90% & redraw Repayments payments & closures Sep 18 Feb 19 Sep 19 Mar 20 VIC/TAS 32% QLD 15% Owner Occupier Investor 58.4% 41.6% W
Slide 18: Housing arrears and repayment buffers
2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 NSW/ACT QLD SA/NT VIC/TAS WA Total 60% ($bn) 50% 9.2 9.9 9.7 8.7 40% 7.9 2.0 1.5 7.6 31% 32% 6.8 3.8 2.3 30% 5.9 1.6 1.4 2.4 1.1 20% 14% 14% 13% 13% 16% 15% 16% 15% 7.9 8.2 7% 7% 5.4 5.5 6.4 6.3 10% 4.8 5.1 3% 3% 0% > 1-2
Slide 19: Housing lending portfolio metrics
(1) Excludes Asia (5) Excludes line of credit products (2) Drawdowns is defined as new lending excluding limit increases and redraws in the previous six month period (6) Excludes Advantedge and line of credit (3) Portfolio sourced from APRA Monthly Banking Statistics, Sep-19 restated to align with d
Slide 20: House prices likely to fall
HOUSE PRICES ARE LIKELY TO FALL 10 TO 15% HOUSE PRICES HAD RECOVERED EARLIER SHARP DECLINES Australian Capital City Price Growth 15.0 Year-ended* x 100 J~\ [\ J~\I\ 73% § 5.0 / & 0.0 = V J 10.0 eis Monthly growth* 12% 205 205 15 2006 2008 2010 «2012 «2014«S« «2016 += 2018-2020 Source: National Austr
Slide 21: Wages and household interest payments
(y/y%) (y/y%) (forecast) 8 5 Wage price index 7 6 4 5 4 3 3 2 2 1 0 1 -1 -2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 (%) (%) 10 Household interest payments as a share of income 8 6 4 2 0 * Dotted lines are post inflation tar
Slide 22: Asset quality
ASSET QUALITY
Slide 23: Credit impairment charge and arrears
($m) 0.38% • 1,161 0.15% 0.16% 0.13% 0.14% • 807 406 449 470 373 33 27 71 59 21 302 347 416 443 333 • Mar 18 Sep 18 Mar 19 Sep 19 Mar 20 Forward looking EA top-up (COVID-19) Forward looking adjustments (FLAs) Credit impairment charge (CIC) Credit impairment as a % of GLAs (half year annualised) ($m)
Slide 24: Collective provisions
($m) 1.21% 4,401 0.92% 0.94% 0.96% 3,360 807 0.72% 3,054 3,249 641 0.52% 0.54% 0.56% 581 614 662 2,473 2,635 2,719 2,932 Sep 18 Mar 19 Sep 19 Mar 20 Sep 18 Mar 19 Sep 19 Mar 20 Collective Provisions as % of Credit Risk Weighted Assets Collective Provisions as % of GLAs ($m) • 4,835 3,731 3,900 1,509
Slide 25: Expected credit loss scenarios
• 1H20 $m 100% Base 100% Severe (probability case Downside weighted) • • • • • • (1) Expected credit losses (ECL) excludes collective provisions on fair value loans and derivatives. Scenarios, prepared for purposes of informing forward looking provisions, rely on NAB Economics modelling and manageme
Slide 26: Total business lending
• • • • • • • • • 5% 22% 21% • 19% Low Medium 28% 42% 59% 74% • • Total B&PB Business Business Lending Lending Very • High High Fully Secured 19% 11% Partially Secured Unsecured • (1) Housing includes IRB Residential mortgages asset class. Business includes IRB Corporate (incl. Corporate SME) and Sp
Slide 27: Credit impairment charge history
1.4% GFC 1.2% 1.0% 0.8% 0.6% 0.38% 0.4% 0.2% Late 80’s / Early 90’s Recession 0.0% Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Mar 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Slide 28: Long-run net write-off rates
1985 2020 (1) For 1985 Group business mix, all overseas GLAs are allocated to Commercial category (2) Data used in calculation of net write off rate as a % of GLAs is based on NAB’s Australian geography and sourced from NAB’s Supplemental Information Statements (2007 - 2019) and NAB’s Annual Financi
Slide 29: Business lending credit quality
($m) ($m) 0.61% 0.62% 0.67% 0.14% 0.66% 0.10% 0.07% 0.06% 0.0% 151 1,202 1,257 1,394 1,420 103 77 55 -1.0% Sep 18 Mar 19 Sep 19 Mar 20 Sep 18 Mar 19 Sep 19 Mar 20 Credit Impairment charge Credit Impairment/GLAs (half year annualised) Total Business Lending 90+ DPD and GIAs Business Lending 90+ DPD a
Slide 30: Housing and non-housing 90+ DPD
($m) ($m) 1.07% 0.95% 0.78% 0.83% 2,111 217 1,905 1,563 1,662 1,036 133 119 126 955 707 844 856 818 950 1,075 Sep 18 Mar 19 Sep 19 Mar 20 Sep 18 Mar 19 Sep 19 Mar 20 Housing 90+ DPD and GIAs Non-housing 90+ DPD and GIAs 90+ DPD and GIAs to GLAs 5% 5% 5% 5% 21% 21% 21% 21% 26% 26% 26% 25% 74% 74% 74%
Slide 31: Provisions and specific coverage
($m) ($m) 4,401 1,500 50.00% 337 45.8% 44.4% 56 45.00% 1,300 39.7% 40.6% 40.00% 3,360 1,100 3,249 35.00% 177 900 827 3,054 782 30.00% 161 65 717 73 675 98 125 134 700 25.00% 4,008 87 80 87 20.00% 500 3,118 15.00% 3,015 684 702 2,840 300 588 630 10.00% 100 5.00% Sep 18 Mar 19 Sep 19 Mar 20 Sep 18 Mar
Slide 32: Credit exposure by rating grade
($bn) Investment grade Sub investment grade Default 62% Mar 20 37% Mar 20 1% Mar 20 ≥ 0 27% 26% 23% 20% 0 17% 14% 15% 14% 13% 13% 12% 11% 0 0 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 Sep 17 Sep 18 Sep 19 Mar 20 (1) For internal ratings based portfolios. Excluding Bank and Sovereign ex
Slide 33: Exposure by industry
(1) Industry classifications are aligned to those disclosed in the 31 March 2020 Pillar 3 report – Table 4.1D 33
Slide 34: COVID-19 impacted sector exposures
• EAD Portfolio by sector Mar 20 Portfolio security Mar 201 EAD $14.6bn EAD $14.6bn 2.2 7.0 3.9 • 7.6 8.5 • Non-Discretionay Discretionary B&PB C&IB NZ • • Direct lending EAD $11.0bn to airlines and • aircraft leasing 1.4 3.0 companies 3.7 • Severely 8.0 • impacted by 5.1 international and domestic
Slide 35: Commercial property and air travel exposures
EAD $11.7bn • • • • EAD $74.2bn 17.1% • 80 18.0% 9.5 11.6% 11.3% 10.2% 9.9% 75 31.6 61 62 62 61 • 40 -15.0% Sep 09 Sep 13 Sep 16 Sep 19 Mar 20 • B&PB C&IB NZ (1) Air Travel and related services defined based on relevant ANZSIC codes (2) Fully Secured is where the loan amount is less than 100% of the
Slide 36: Commercial property exposure
17.1% 80 18.0% 11.6% 11.3% 10.2% 9.9% 75 61 62 62 61 40 -15.0 Sep 09 Sep 13 Sep 16 Sep 19 Mar 20 (1) Measured as balance outstanding as at 31 March 2020 per APRA Commercial Property ARF 230 definitions 36
Slide 37: Security coverage
• • • • Fully Secured 83% 132 146 122 118 120 Unsecured 2% Mar 18 Sep 18 Mar 19 Sep 19 Mar 20 (1) Fully Secured is where the loan amount is less than 100% of the bank extended value of security; Partially Secured is where the loan amount is greater than 100% of the bank extended value of security; U
Slide 38: Capital and funding
CAPITAL AND FUNDING
Slide 39: CET1 ratio movement
(%) (0.35) (0.06) (0.24) (0.13) (0.15) 11.20 10.38 10.39 ($bn) ($bn) Sep 19 Volume Model and Credit Derivatives Translation Mar 20 Methodology Quality and FX and Repurchase Portfolio Agreements Mix (1) Net of 1.5% discount (2) DRP underwrite (17bps) and NCN conversion (18bps) (3) Assumes $3bn placem
Slide 40: APRA capital ratios
Mar 19 Sep 19 Mar 20 APRA Common Equity Tier 1 ratios APRA Tier 1 ratios APRA Total Capital ratios Equivalent Internationally Comparable ratios1 (1) Internationally Comparable CET1 ratios align with the APRA study entitled “International capital comparison study” released on 13 July 2015 40
Slide 41: Liquidity and maturities
• • • • • 1 1 • • • • • • (1) Excludes BNZ maturities
Slide 42: Funding and liquidity movements, March 2020
($bn) ($bn) 6 4 1 5 19 21 1 9 Customer Other 1 Short Term Term Term Liquid Other Short Lending Deposits Wholesale Wholesale Wholesale Assets Term Assets Funding Funding FX Funding 2 and Other Maturities Movements over the month of March 2020 Movements over the month of March 2020 ($bn) ($bn) (1) Net
Slide 43: Funding composition
13 17 9 13 24 3 4 3 23 13 8 Customer Equity Short Term Term Term Term Liquid Other Other Lending Deposits Wholesale Wholesale Wholesale Wholesale Assets Short Term Funding Funding Funding Funding Assets FX and Issuance 9 Maturities9 Other (1) Excludes repurchase agreements, trading and hedging deriv
Slide 44: Term funding issuance and maturity profile
AUD 32% GBP 16% USD 32% Other 20% 33 30 28 36 37 25 22 28 26 16 27 25 23 11 19 30 32 12 18 23 21 16 6 10 6 5 5 5 6 6 5 5 5 4 2 FY16 FY17 FY18 FY19 HY20 2H20 FY21 FY22 FY23 FY24 FY25 Beyond Secured Senior and Sub Debt Secured Senior and Sub Debt (1) At 31 March 2020, NAB has utilised 42% of its cover
Slide 45: Issuance, maturities and capital requirements
• • • • • (A$bn) Issuance Maturities (1) Capital surplus of 3% is generally higher than the normal level for D-SIBs, as a result of the ‘unquestionably strong’ capital benchmarks (2) Excludes any Pillar 2 requirements and additional 1%-2% RWA requirement through “feasible alternative methods” (3) CC
Slide 46: Funding costs
(bps) (bps) 225 Period of increased 200 subordinated debt issuance 175 150 125 100 75 50 25 - Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17 Sep-19 Sep-21 Term Funding Portfolio WAC Forecast WAC of Portfolio New Issuance WAC (rolling 6m average) (bps) (bps) Current term deposit pricing is ~20- 80 90 25bp
Slide 47: Regulatory changes and implementation deferral
REGULATORY CHANGES AND IMPLEMENTATION DEFERRAL REGULATORY CHANGE DATES DEFERRAL OF REGULATORY CHANGE * APRA has deferred its scheduled implementation of the Basel III Original Amended : i" . etm 8 A Change a date reforms in Australia by one year, consistent with international implementation. APS 110
Slide 48: Social and governance
Sn SOCIAL AND GOVERNANCE
Slide 49: UN Sustainable Development Goals
(1) www.un.org/sustainabledevelopment 49
Slide 50: Customer hardship assistance
• (#) • • 17,633 11,284 8,389 • Mar 19 Sep 19 Mar 20 3 Customers who received hardship assistance (Australia) (# and $m) 1,628 16,837 17,378 17,574 1,133 842 Sep 19 Dec 19 Mar 20 Customer cases opened 18.8 19.6 19.4 4 Mar 19 Sep 19 Mar 20 Value of loans provided Number of loans (1) NAB-backed Speckl
Slide 51: Volunteering and community
• • • • • • (# days) ($m) 0.82 0.84 0.75 679 0.39 0.40 544 535 0.32 5,443 3,991 3,858 0.43 0.43 0.44 Mar 19 Sep 19 Mar 20 Mar 19 Sep 19 Mar 20 # skilled volunteering days contributed Employee NAB matched # general volunteering days contributed (1) See our 2019-2021 Reconciliation Action Plan and Pro
Slide 52: Bushfire support and donations
• $2.9m • 0.10 1.24 $0.9m • 0.12 0.40 1.58 0.40 Donations ($m) Grants($m Grants ($m) and #) Local organisations Employee evacuation • ARC disaster & recovery 1 Business customer premises loss ARC resilience project Customer & employee home loss • • • • • (1) This donation has been pledged to Austral
Slide 53: Environmental finance and energy exposure
• ($bn) 70.0 • 37.9 35.0 29.7 33.6 17.5 20.2 15.3 • 14.4 16.1 17.7 35.0 Mar 19 Sep 19 Mar 20 2025 Target • • $7.8bn $7.1bn $7.3bn Gas $6.2bn 15% 8% 13% 5% 2% 1% Coal 7% 15% • 5% 18% 16% Mixed Fuel 19% 25% 26% 26% Other/Mixed 25% Renewable 14% 11% 12% 14% Hydro 33% 31% 29% 30% Wind Sep 18 Mar 19 Sep
Slide 54: Top renewable energy players, Australia
• • • • Top renewable energy players – Australia2 • Cumulative value of deals in USDbn (2004 – 2019) • • • (1) We have also set new targets for a range of environmental performance areas, including net energy use (GJ) (a 30% reduction) and office paper (tonnes) (a 20% reduction) from 2019 baseline l
Slide 55: Australian economy
AUSTRALIAN ECONOMY
Slide 56: Australia economic forecasts
• CY17 CY18 CY19 CY20(f) CY21(f) • GDP growth2 2.2 2.7 1.8 -4.3 3.5 • Unemployment3 5.4 5.0 5.1 11.6 7.3 Core Inflation4 1.9 1.8 1.4 1.5 0.2 • Cash rate3 1.50 1.50 0.75 0.25 0.25 • FY17 FY18 FY19 FY20(f) FY21(f) Housing 6.6 5.3 3.1 3.1 0.3 Personal -0.9 -1.4 -4.4 -5.3 -0.4 Business 4.1 4.4 3.3 16.5
Slide 57: New Zealand economic forecasts
• CY17 CY18 CY19 CY20(f) CY21(f) GDP growth2 3.1 3.2 2.3 -9.1 1.4 Unemployment3 4.5 4.3 4.0 10.0 9.5 • Inflation4 1.6 1.9 1.9 0.9 1.2 • Cash rate (OCR)3 1.75 1.75 1.0 0.25 0.25 • FY17 FY18 FY19 FY20(f) FY21(f) • Housing 6.6 6.0 6.5 7.3 2.9 Personal 7.8 4.7 0.1 -4.8 -5.5 • Business 4.8 4.1 4.8 7.5 -4
Slide 58: Economic indicators and business survey
(%) (forecast) (%) (forecast) 10 10 12 6 8 8 11 4 6 6 10 2 4 4 2 2 9 0 0 0 8 -2 -2 -2 7 -4 -4 -4 6 -6 -6 -6 5 -8 -8 -8 -10 -10 4 -10 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2007 2009 2011 2013 2015 2017 2019 2021 (Net bal.) (Net bal.) 40 20 20 0 0 20 -20 -20 0 -40 -40 -20 -60 -60 -80 -80 -
Slide 59: But large stimulus will help
BUT LARGE STIMULUS WILL HELP LARGE FISCAL STIMULUS HAS BEEN ANNOUNCED WHICH SHOULD SEE A HUGE FISCAL DEFICIT Fiscal measures, share of GDP 35 |mLoans and equity injections 30 /™ Revenue and expenditure measures World war ™ Discretionary stimulus measures "Excluding stimulus 1900 1925 1950 1975 2000
Slide 60: Government stimulus package
BUT LARGE STIMULUS WILL HELP THE GOVERNMENT'S STIMULUS PACKAGE Separately Separately Separately (Note: mostly front-loaded to Q2 2020 1st package announced 2ndpackage — announced 3rd package announced and 2020-2021) (Sb) (Sb) (Sb) (Sb) (Sb) (Sb) Total ($b) (A) Taxes / payments etc Households 1. Inco
Slide 61: New Zealand economy indicators
(Net balance) (%) (%) NZIER QSBO - General Business Situation 10 NZ Unemployment rate NZ GDP (yoy) 80 60 8 40 6 20 0 4 -20 2 -40 -60 0 -80 Dec 07 Dec 11 Dec 15 Dec 19 Dec 07 Dec 11 Dec 15 Dec 19 Mar 96 Mar 00 Mar 04 Mar 08 Mar 12 Mar 16 Mar 20 NZ$ (Index) (yoy%) House prices Dwelling sales transacte
Slide 62: Contact details
CONTACT DETAILS For further information contact: Catriona Meharry Group Treasurer +61 436 913 161 Sarah Stokie Debt Investor Relations +61 477 721 489 Email: nab.capital.and.funding@nab.com.au sarah.m.stokie@nab.com.au 62 Scott Mitchell Head of Group Funding +61 3 9322 6593
Slide 63: Disclaimer
DISCLAIMER THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN THE UNITED STATES OR TO ANY “U.S. PERSON” (AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT)) AND MAY NOT BE DISTRIBUTED OR RELEA
Slide 64: Disclaimer (cont.)
DISCLAIMER (CONT.) While care has been taken in preparing the information in this presentation, NAB does not warrant or represent that such information is accurate, reliable or complete, and it is subject to change without notice. Certain information in this presentation has been sourced from third
National Australia Bank — Debt Investor Presentation (May 2020) on 6ix