National Australia Bank Limited · ASX:NAB
National Australia Bank — Investor Presentation (May 2021)
116 slides from National Australia Bank's investor presentation, May 6, 2021
Slide 1: Half Year Results 2021
HALF YEAR RESULTS 2021 Investor Presentation 6 May 2021 Ross McEwan Chief Executive Officer Gary Lennon Chief Financial Officer ©2021 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686 National Australia Bank
Slide 2: NAB 2021 Half Year Results Index
NAB 2021 HALF YEAR RESULTS INDEX This presentation is general background information about NAB. It is intended to be used by a professional analyst audience and is not intended to be relied upon as financial advice. Refer to page 116 for legal disclaimer. Financial information in this presentation i
Slide 3: Overview
OVERVIEW ROSS McEWAN Group Chief Executive Officer
Slide 4: Key Messages
KEY MESSAGES Financial results reflect improving economy Risks remain – strength and stability continue to be a priority Executing our strategy with discipline and focus Building momentum, with more to do Well positioned to support a business-led recovery 4
Slide 5: Sound Financial Results
SOUND FINANCIAL RESULTS METRIC 1H21 2H20 1H21 V 2H20 Statutory net profit ($m) 3,208 1,246 Large CONTINUING OPERATIONS (EX LARGE NOTABLE ITEMS1) Cash earnings2 ($m) 3,343 2,258 48.1% Underlying profit ($m) 4,576 4,952 (7.6%) Cash ROE 11.1% 7.7% 3.4% Diluted Cash EPS (cents) 96.9 67.3 44.0% Dividend
Slide 6: Economy Improving But Risks Remain
ECONOMY IMPROVING BUT RISKS REMAIN KEY CONSIDERATIONS GDP BACK TO PRE-COVID LEVELS AND EXPECTED TO IMPROVE3 (%) 4.0 Current forecasts 2H20 forecasts • Strong economic recovery forecast to continue in 2021 – 2.6 1.8 GDP growth1 of 3.7% and unemployment1 to reduce to 5.1% 2.0 0.6 0.0 -0.3 0.1 • Record
Slide 7: Balance Sheet Strength Remains a Key Priority
BALANCE SHEET STRENGTH REMAINS A KEY PRIORITY COMMENTS COLLECTIVE PROVISION COVERAGE (%) • Balance sheet strength and supporting customers are key strategic priorities • Expect to reset capital and dividends for more normal operating environment as greater clarity over recovery emerges 1.56 1.50 1.2
Slide 8: We Have a Clear Strategic Ambition
WE HAVE A CLEAR STRATEGIC AMBITION WHY WE ARE HERE To serve customers well and help our communities prosper WHO WE ARE HERE FOR Colleagues Customers Trusted professionals that are proud to be a part of NAB Choose NAB because we serve them well every day WHAT WE WILL BE KNOWN FOR Relationship-led Eas
Slide 9: Successful Execution of Our Strategy Will Deliver Results
SUCCESSFUL EXECUTION OF OUR STRATEGY WILL DELIVER RESULTS KEY MEASURES OF SUCCESS OUR AMBITION OVER FY23-25 Colleague engagement • Top quartile engagement Customer NPS1 • Strategic NPS positive and #1 of majors • Focus on growing share in target segments, while managing risk and pricing disciplines
Slide 10: Cultural Change to Drive Execution Through Focus and Clarity
CULTURAL CHANGE TO DRIVE EXECUTION THROUGH FOCUS AND CLARITY KEY AREAS OF FOCUS PROGRESS ENGAGEMENT Implemented clear customer centric operating model with end to end accountability Quarterly employee GREAT LEADERS Leadership team appointments completed ‘Heartbeat’ engagement surveys – continu
Slide 11: Reinvigorating Our Leading Business & Private Banking Franchise
REINVIGORATING OUR LEADING BUSINESS & PRIVATE BANKING FRANCHISE BUILDING MOMENTUM IN AN IMPROVING ENVIRONMENT • Improving economic environment, strong business confidence and conditions, and elevated capacity utilisation • New leadership with heightened focus on performance disciplines • Addition of
Slide 12: Building Momentum in Personal Banking
BUILDING MOMENTUM IN PERSONAL BANKING HOME LOAN APPLICATIONS UP AND GROWTH CLOSER TO SYSTEM Applications up ~45% System growth multiple improving and market share stabilising 14.6% 14.5% 14.5% 14.4% 14.4% 14.4% 0.7 0.5 0.2 0.3 0.3 -0.6 NAB HL growth x system Market share -1 10.00% 1H20 2H20 1H21 Oct
Slide 13: Executing Well in C&IB, BNZ & UBank
EXECUTING WELL IN C&IB, BNZ & UBANK C&IB BNZ UBANK Disciplined growth Growth in personal and SME New customer acquisition • Highly professional relationship Growth in home lending • Announced acquisition of 86 400 in managers and specialists Jan 21 – received ACCC and APRA approval4 • GLAs 3%1 up on
Slide 14: Technology Investment Underpins Revenue and Cost Targets
TECHNOLOGY INVESTMENT UNDERPINS REVENUE AND COST TARGETS SUPPORTING PRODUCTIVITY, COST REDUCTION AND REVENUE GROWTH Faster speed to market NPS1 uplift for platforms on cloud Insourcing key technology functions Customer & colleague digital tools Leveraging Data & Analytics Deep investment in cloud an
Slide 15: Customer Experience Leading Peers But More Work to Do
CUSTOMER EXPERIENCE LEADING PEERS BUT MORE WORK TO DO STRATEGIC NPS1,2 -5 -7 -10 -10 -15 -14 -16 -20 -25 -30 Nov 16 Mar 17 Jul 17 Nov 17 Mar 18 Jul 18 Nov 18 Mar 19 Jul 19 Nov 19 Mar 20 Jul 20 Nov 20 Mar 21 NAB Peer 1 Peer 2 Peer 3 BUSINESS3 CONSUMER4 -5 5 -10 -11 0 -14 -3 -15 -5 -5 -20 -18 -10 -21
Slide 16: 1H21 Financials
1H21 FINANCIALS GARY LENNON Group Chief Financial Officer
Slide 17: Group and Divisional Performances
GROUP AND DIVISIONAL PERFORMANCES GROUP EARNINGS ($m) (7.6%) Large 48.1% 4,952 4,576 3,208 3,343 2,258 1,246 2 2 Statutory profit Cash earnings1(ex large notable items) Underlying profit (ex large notable items) 2H20 1H21 UNDERLYING DIVISIONAL PROFIT3 ($m) 1.2% 1,793 1,815 (0.8%) (16.2%) 9.2% 1,142
Slide 18: Remediation Work Progressing
REMEDIATION WORK PROGRESSING CUSTOMER-RELATED REMEDIATION PROVISION CHARGES1 PAYROLL REMEDIATION ($m) 832 • Extensive review into payments to both current and 66 former Australian colleagues 525 • Range of potential payroll under and over payment 314 46 issues; remediating under payments dating back
Slide 19: Revenue Stable Ex Markets & Treasury
REVENUE STABLE EX MARKETS & TREASURY NET OPERATING INCOME (EX LARGE NOTABLE ITEMS) ($m) HoH revenue decline 5.0% (Flat on PcP) 66 (125) 81 (442) (25) Largely driven by non-repeat of mark-to-market gains on the high quality liquids portfolio in 2H20 8,884 8,435 8,439 Mar 20 Sep 20 Volumes Margin Fees
Slide 20: Markets & Treasury Income Lower
MARKETS & TREASURY INCOME LOWER GROUP MARKETS & TREASURY INCOME ($m) 1,250 940 838 808 578 888 572 453 392 277 372 402 387 362 345 (4) (17) 0 71 (86) Mar 19 Sep 19 Mar 20 Sep 20 Mar 21 1 2 3 Derivative Valuation Adjustment Customer Risk Management NAB Risk Management GROUP MARKETS & TREASURY INCOME
Slide 21: Net Interest Margin Benefiting From Lower Funding Costs
NET INTEREST MARGIN BENEFITING FROM LOWER FUNDING COSTS NET INTEREST MARGIN (EX LARGE NOTABLE ITEMS) 0.02% (0.03%) 0.00% 0.02% (0.02%) (0.03%) 1.79% 1.78% 1.79% 1.74% Mar 20 Sep 20 Lending Funding Costs Deposits Capital & Other Mar 21 Ex Higher Liquids Other Mar 21 Margin Markets & Markets & Treasur
Slide 22: Lower Operating Expenses and Investment Spend
LOWER OPERATING EXPENSES AND INVESTMENT SPEND OPERATING EXPENSES (EX LARGE NOTABLE ITEMS) ($m) HoH expense decline 1.8% (PcP growth 3.1%) (181) 15 42 238 (41) (141) 3,932 3,863 3,747 • Insourcing benefits • Higher performance-based compensation • FTE productivity • Growth & COVID-19 support hires Ma
Slide 23: Credit Impairment Writeback, Provisions Modestly Lower
CREDIT IMPAIRMENT WRITEBACK, PROVISIONS MODESTLY LOWER CREDIT IMPAIRMENT CHARGE (CIC) KEY CONSIDERATIONS 1H21 ($m) 0.54% 0.38% • Underlying CIC writeback of $114m, including a low 0.15% 0.16% 1,601 level of individual impairments and improved (0.04%) delinquencies for the unsecured retail portfolio
Slide 24: Asset Quality
ASSET QUALITY KEY CONSIDERATIONS NEW IMPAIRED ASSETS ($m) • 90+ DPD & GIA ratio uplift mainly due to missed 807 Small number of well-secured NZ payments for a portion of the cohort of Australian home dairy exposures loan customers exiting deferrals 276 • Modest reduction in Watch loans post Sep 20 m
Slide 25: Provisions
PROVISIONS MOVEMENT IN PROVISIONS1 ($m) 221 (202) (235) (50) 6,011 5,745 4,835 Total Provisions Total Provisions Underlying collective Forward looking Target sector Specific provision Total Provisions Mar 20 Sep 20 provision Economic forward looking Mar 21 Adjustment adjustments UNDERLYING CP ECONOM
Slide 26: COVID-19 Non-Retail Sectors of Interest Deteriorating
COVID-19 NON-RETAIL SECTORS OF INTEREST DETERIORATING KEY CONSIDERATIONS SECTORS OF INTEREST – KEY METRICS SUMMARY % of 90+ DPD and • Continued close monitoring of exposures to sectors EAD $bn GIA to EAD significantly impacted by COVID-19 Sep 20 Mar 21 Sep 20 Mar 21 • Sectors of interest have experi
Slide 27: Some Deferral Customers Experiencing Stress
SOME DEFERRAL CUSTOMERS EXPERIENCING STRESS HOME LOAN CUSTOMERS EXITED DEFERRALS1 SME BUSINESS LOAN CUSTOMERS EXITED DEFERRALS2 • ~$4.9bn (~10% of total deferral balances) of • ~$2bn (~9% of deferral EAD) of exited deferral exited deferral customers are behind on customers being managed by SBS3, of
Slide 28: Strong Capital Position
STRONG CAPITAL POSITION GROUP BASEL III COMMON EQUITY TIER 1 CAPITAL RATIO (%) Capital generation +72bps (+69bps ex DRP) 0.12 0.06 0.78 (0.20) 0.14 12.37 12.75 11.47 1 Sep 20 Cash earnings Dividend RWA Rates and FX MTM Other Mar 21 Mar 21 2 (net DRP) pro forma CET1 CONSIDERATIONS GROUP RWA ($bn) • S
Slide 29: Funding & Liquidity
FUNDING & LIQUIDITY KEY MESSAGES TERM FUNDING FACILITY Current TFF available 3 May 2021 • Funding and liquidity position remains strong with significant $14.5bn surpluses above regulatory minimums Additional Allowance: $4.9bn 2 • System liquidity remains high due to continued deposit inflows, centra
Slide 30: Outlook
OUTLOOK ROSS McEWAN Group Chief Executive Officer
Slide 31: Outlook
OUTLOOK Defined and clear strategy, making progress with more to do Focus and discipline key to execution Optimistic about the outlook for Australia and New Zealand Well positioned to grow with customers 31
Slide 32: Additional Information
ADDITIONAL INFORMATION DIVISIONAL PERFORMANCES NAB At A Glance 33 We Have Clear Growth Opportunities 34 Divisional Contributions 35 Business & Private Banking 36 Personal Banking 39 Corporate & Institutional Banking 42 New Zealand Banking 44
Slide 33: NAB at a Glance
NAB AT A GLANCE >31,000 ~8 million 814 >160 years Employees Customers Branches/Business centres in operation CASH EARNINGS DIVISIONAL SPLIT1 Key Financial Data 1H21 Division % of Cash Earnings Cash Earnings1 $3,343m Business & Private Banking 36% Cash ROE 11.1% Personal Banking Update 26% Gross Loan
Slide 34: We Have Clear Growth Opportunities
WE HAVE CLEAR GROWTH OPPORTUNITIES CORPORATE & BUSINESS & PRIVATE PERSONAL BANKING INSTITUTIONAL BNZ UBANK BANKING BANKING Clear market leadership Simple & digital Disciplined growth Grow in personal & New customer SME acquisition • Industry-leading relationship bankers, enabled by data and • Flexib
Slide 35: Divisional Contributions
DIVISIONAL CONTRIBUTIONS Cash Earnings Underlying Profit Division 1H21 ($m) 1H21 v 2H20 1H21 ($m) 1H21 v 2H20 Business and Private Banking 1,216 9.0% 1,815 1.2% Personal Banking 859 24.7% 1,133 (0.8%) Corporate and Institutional Banking 782 5.7% 997 (16.2%) New Zealand Banking1 616 30.0% 835 9.2% (1
Slide 36: Business & Private Banking
BUSINESS & PRIVATE BANKING CASH EARNINGS AND REVENUE NET INTEREST MARGIN ($m) -5.2% (-0.1% HoH) -10.3% (9.0% HoH) 3,222 3,056 3,054 2.92% 2.90% 1,356 2.81% 2.83% 1,116 1,216 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar 21 Sep 19 Mar 20 Sep 20 Mar 21 Cash earnings Total revenue BUSINESS AND HOUSING LENDING
Slide 37: Business Lending Growth & Market Share
BUSINESS & PRIVATE BANKING BUSINESS LENDING GROWTH & MARKET SHARE AUSTRALIAN SME BUSINESS LENDING GROWTH (YOY)1 8.4% (5.9%) 0.7% (0.7%) (0.7%) (2.9%) 2 3 Agri Health CRE Other NAB System (RBA) B&PB $31bn $8bn $28bn $43bn $110bn Denotes lending balance as at 31 March 2021 SME AND AGRI BUSINESS LENDIN
Slide 38: Quickbiz for Small Business Customers
BUSINESS & PRIVATE BANKING QUICKBIZ FOR SMALL BUSINESS CUSTOMERS DIGITAL SMALL BUSINESS UNSECURED LENDING KEY CONSIDERATIONS • Access to unsecured finance for term loan, overdraft, business • Applications growth in 2H20 and 1H21 has been impacted by: cards, equipment loan and broker assisted custome
Slide 39: Personal Banking
PERSONAL BANKING CASH EARNINGS AND REVENUE NET INTEREST MARGIN ($m) -3.0% (-0.2% HoH) 14.1% (24.7% HoH) 2,298 2,233 2,229 2.06% 2.02% 2.05% 1.96% 753 689 859 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar 21 Sep 19 Mar 20 Sep 20 Mar 21 Cash earnings Total revenue HOUSING LENDING GLAs CREDIT IMPAIRMENT CHARG
Slide 40: Increasing Use of Digital Tools
PERSONAL BANKING INCREASING USE OF DIGITAL TOOLS VIRTUAL ASSISTANT Virtual Assistant 100% 73% Growing use of the Virtual Assistant has resulted in call 60% reductions to the call centre through 800 • Increasing number of virtual interactions 873 600 • Increasing containment1 of interactions within t
Slide 41: Innovating with StraightUp Card
PERSONAL BANKING INNOVATING WITH STRAIGHTUP CARD STRAIGHTUP CARD NAB’s most popular credit card product • Launched the NAB StraightUp Card in 2H20, Australia’s first no-interest credit card 33% of NAB’s credit card applications in 1H21 • Providing a response to customers wanting access to credit tha
Slide 42: Corporate & Institutional Banking
CORPORATE & INSTITUTIONAL BANKING CASH EARNINGS AND REVENUE REVENUE BREAKDOWN1 ($m) ($m) 8.0% (-12.3% HoH) -0.5% (-3.3% HoH) 48.5% (-32.3% HoH) 15.7% (5.7 HoH) 1,908 592 1,549 1,673 1,279 1,316 1,272 676 740 782 401 270 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar
Slide 43: Customer Metrics
CORPORATE & INSTITUTIONAL CUSTOMER METRICS BANKING LARGE CORPORATE & INSTITUTIONAL – INTEREST RATE HEDGING3 FOREIGN EXCHANGE4 RELATIONSHIP STRENGTH INDEX1 Relationship Strength Index Relationship Strength Index 620 (Index) (Index) 600 640 650 580 600 600 560 560 540 550 520 520 480 500 500 480 440 4
Slide 44: New Zealand Banking
NEW ZEALAND BANKING CASH EARNINGS AND REVENUE NET INTEREST MARGIN (NZ$m) 2.5% (6.2% HoH) 9.6% (30.0% HoH) 1,323 2.29% 1,291 1,246 2.24% 616 2.20% 562 2.14% 474 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar 21 Sep 19 Mar 20 Sep 20 Mar 21 Cash earnings Total revenue BUSINESS & HOUSING LENDING GLAs CREDIT IMP
Slide 45: Key Customer Metrics
NEW ZEALAND BANKING KEY CUSTOMER METRICS BNZ BUSINESS NPS1,3 25 15 5 3 -5 -13 -15 -15 -25 -26 -35 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 BNZ Peer 1 Peer 2 Peer 3 BNZ CONSUMER NPS2,3,4 45 40 40 35 36 30 34 25 26 20 15 19
Slide 46: Lending Mix
NEW ZEALAND BANKING LENDING MIX PORTFOLIO BREAKDOWN – TOTAL NZ$91.1BN MORTGAGE PORTFOLIO BREAKDOWN BY GEOGRAPHY – TOTAL MORTGAGE NZ$49.5BN Wellington 11% Waikato 7% Canterbury 12% Bay of Plenty 6% Commercial Real Estate 8% Mortgages 54% Other 16% Agriculture, Auckland 48% Forestry and Fishing 16% AG
Slide 47: New Zealand Housing Lending Key Metrics
NEW ZEALAND BANKING NEW ZEALAND HOUSING LENDING KEY METRICS New Zealand Housing Lending Sep 19 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar 21 Portfolio Drawdowns1 Total Balances (spot) NZ$bn 43.0 44.8 46.0 49.5 5.8 5.1 9.5 By product - Variable rate 15.9% 15.2% 14.1% 12.9% 15.4% 15.1% 11.2% - Fixed rate
Slide 48: NZ Customer Deposits by Interest Rate
NEW ZEALAND BANKING NZ CUSTOMER DEPOSITS BY INTEREST RATE NZ CUSTOMER DEPOSITS BY INTEREST RATE (NZD) $42.5bn of deposits already at or near zero interest rate $24.7bn $17.8bn $8.7bn $13.1bn $2.3bn $0.9bn less than 0.01% between 0.01% to 0.25% between 0.26% to 0.50% between 0.51% to 0.75% between 0.
Slide 49: Technology & Operations Update
ADDITIONAL INFORMATION TECHNOLOGY & OPERATIONS UPDATE
Slide 50: Solid Progress Made on Our Technology Transformation
SOLID PROGRESS MADE ON OUR TECHNOLOGY TRANSFORMATION KEY AREAS OF FOCUS 3 YEAR ACHIEVEMENTS1 Leverage the Cloud, • 45% of total apps running on the cloud – with no downtime from infrastructure issues Microservices and APIs • Built >120 microservices and >1,600 APIs – increasing efficiency of new fea
Slide 51: Strong Tech Foundations Enabling Faster Speed to Market
STRONG TECH FOUNDATIONS ENABLING FASTER SPEED TO MARKET Investment in technology infrastructure and architecture (Cloud, Microservices, APIs) over time has increased speed of delivery for colleagues and customers NAB APP – MORE FUNCTIONALITY AND RECORD HIGH NPS1 IB & NAB CONNECT PLATFORMS MOVED TO C
Slide 52: Long-Term: A Sustainable Approach
ADDITIONAL INFORMATION LONG-TERM: A SUSTAINABLE APPROACH
Slide 53: Sustainability Is Embedded in the Long-Term Pillar of Our Group Strategy
SUSTAINABILITY IS EMBEDDED IN THE LONG-TERM PILLAR OF OUR GROUP STRATEGY COMMERCIAL RESPONSES TO RESILIENT AND SUSTAINABLE INNOVATING FOR THE SOCIETY’S BIGGEST CHALLENGES BUSINESS PRACTICES FUTURE Supporting a low-carbon economy, driving Managing our environmental, social and Driving investment in n
Slide 54: Commercial Responses – Climate Change
COMMERCIAL RESPONSES – CLIMATE CHANGE • NAB is the only Australian bank to have signed the United Nations’ Collective Commitment to Climate Action • Focused on supporting customers with their transition plans, aligning our portfolio to net zero emissions by 2050 • Continued drive for opportunities i
Slide 55: Commercial Responses – Climate Change
COMMERCIAL RESPONSES – CLIMATE CHANGE Energy generation EAD 7.79 by fuel source1 ($bn) 7.26 7.37 1.16 6.83 0.94 0.98 0.12 0.08 0.78 0.12 Gas 1.15 1.04 0.08 • Renewables comprise 72.8% of energy 1.16 0.99 Coal generation EAD at 1H21, compared to 1.94 1.74 68.8% at 1H20 1.93 1.70 Mixed Fuel • Longer-t
Slide 56: Commercial Responses – Climate Change
COMMERCIAL RESPONSES – CLIMATE CHANGE SUSTAINABLE FINANCING TOP RENEWABLE ENERGY PLAYERS – AUSTRALIA2 • #10 in Climate Bond Initiative's list of largest cumulative global Cumulative value of deals in US$bn (2004 – 31 March 2021) issuers of certified climate bonds1 National Australia Bank Ltd 2.7 • L
Slide 57: Commercial Responses – Supporting Industry and Communities
COMMERCIAL RESPONSES – SUPPORTING INDUSTRY AND COMMUNITIES FINANCIAL HEALTH AND INCLUSION INDIGENOUS ECONOMIC PARTICIPATION • Implemented measures to block descriptions in transfers made via • Progressed key NAB Elevate Reconciliation Action Plan1 internet banking that contain abusive, threatening o
Slide 58: Resilient and Sustainable Business Practices
RESILIENT AND SUSTAINABLE BUSINESS PRACTICES INCLUSIVE CULTURE SUSTAINABLE PROPERTY PORTFOLIO • Belonging for all: additional gender marker and salutation options • Upon completion, all new commercial buildings are expected to added to our systems achieve a 5 Star Green rating • NAB CEO committed to
Slide 59: Australian Business Lending
ADDITIONAL INFORMATION AUSTRALIAN BUSINESS LENDING
Slide 60: Key Metrics
KEY METRICS BUSINESS LENDING REVENUE ($m) 2,248 2,223 2,204 2,205 351 343 329 334 1,897 1,880 1,875 1,871 Sep 19 Mar 20 Sep 20 Mar 21 NII OOI BUSINESS LENDING GLAs ($bn) 215.0 205.1 207.1 206.5 0.1 0.1 0.1 0.1 97.4 105.8 95.6 97.1 109.0 109.1 109.4 109.9 Sep 19 Mar 20 Sep 20 Mar 21 Business & Privat
Slide 61: Business Lending Asset Quality
BUSINESS LENDING ASSET QUALITY 600 BUSINESS LENDING CREDIT IMPAIRMENT CHARGE AND AS BUSINESS LENDING 90+ DPD AND GIAs AND AS % OF GLAs 500 % OF GLAs 0.33% ($m) ($m) 0.14% 0.07% 0.66% 0.72% 0.74% 0.04% 0.67% 400 300 200 336 1,394 1,420 1,474 1,528 100 151 77 44 0 Sep 19 Mar 20 Sep 20 Mar 21 Sep 19 Ma
Slide 62: Business & Private Banking Asset Quality
BUSINESS & PRIVATE BANKING ASSET QUALITY B&PB CREDIT IMPAIRMENT CHARGE AND AS % OF GLAs1 B&PB 90+ DPD AND GIAs AND AS % OF GLAs1 ($m) 0.22% 0.20% ($m) 1.53% 1.32% 0.13% $340.0 1.07% 3,025 0.15% 0.95% 217 196 2,584 0.07% 2,111 27 1,905 1,611 126 21 70 1,246 127 955 1,036 40 7 170 84 84 1,338 1,414 63
Slide 63: Australian Housing Lending
ADDITIONAL INFORMATION AUSTRALIAN HOUSING LENDING
Slide 64: Housing Lending Portfolio Profile
HOUSING LENDING PORTFOLIO PROFILE HOUSING LENDING REVENUE HOUSING LENDING VOLUME GROWTH1 ($m) ($bn) 2,038 2,085 Owner Occupier Investor 1,925 1,988 119 108 122 114 5.8% (3.4% HoH) -7.5% (-3.3% HoH) 152.9 156.4 161.7 1,919 1,977 108.8 104.0 100.6 1,803 1,874 Sep 19 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20
Slide 65: Housing Lending Portfolio Profile
HOUSING LENDING PORTFOLIO PROFILE HOUSING LENDING VOLUME BY BORROWER AND AUSTRALIAN MORTGAGES STATE PROFILE REPAYMENT TYPE1 Owner VIC/TAS 32% Investor Occupier Interest Interest Investor Only, 12.0% Only, 3.6% Principal & QLD 15% Interest, Owner 26.4% Occupier Investor 61.6% 38.4% Owner Occupier WA
Slide 66: Housing Lending Portfolio Profile
HOUSING LENDING PORTFOLIO PROFILE HOUSING LENDING 90+ DPD & GIAs AS % OF GLAs 90+ DPD & GIAs AS % OF TOTAL HOUSING LENDING GLAs – BY CHANNEL 3.0% 2.49% 2.0% 1.74% 2.5% 1.71% 1.67% 1.73% 1.6% 2.0% 1.61% 1.2% 1.5% 1.61% 1.50% 0.8% 1.0% 0.5% 0.4% 0.0% 0.0% Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Mar
Slide 67: Housing Lending Portfolio Quality
HOUSING LENDING PORTFOLIO QUALITY DYNAMIC LVR BREAKDOWN OF DRAWN BALANCE LVR BREAKDOWN AT ORIGINATION 50% 50% Mar 21 Dynamic LVR 42.3% 40% 30% 40% 20% 10% 0% LVR LVR LVR LVR LVR 30% ≤60% 60.01% - 70% 70.01% - 80% 80.01% - 90% >90% Sep 19 Mar 20 Sep 20 Mar 21 20% INCREASED FIRST HOME BUYER ACTIVITY F
Slide 68: Housing Lending Practices & Requirements
HOUSING LENDING PRACTICES & REQUIREMENTS KEY ORIGINATION REQUIREMENTS LOAN-TO-VALUE RATIO (LVR) LIMITS • Income verified using a variety of documents including payslips Principal & Interest – Owner Occupier 95% and/or checks on salary credits into customers’ accounts Principal & Interest – Investor
Slide 69: Housing Lending Key Metrics
HOUSING LENDING KEY METRICS1 Australian Housing Lending Sep 19 Mar 20 Sep 20 Mar 21 Mar 20 Sep 20 Mar 21 Portfolio Drawdowns2 Total Balances (spot) $bn 304 302 299 300 27 29 32 Average loan size $’000 308 309 309 310 389 383 401 - Variable rate 73.5% 75.9% 71.9% 67.8% 78.5% 64.0% 53.2% - Fixed rate
Slide 70: Other Australian Products
ADDITIONAL INFORMATION OTHER AUSTRALIAN PRODUCTS
Slide 71: Deposits & Transaction Accounts
DEPOSITS & TRANSACTION ACCOUNTS DEPOSIT REVENUE CUSTOMER DEPOSITS BY INTEREST RATE1 (%) ($m) 1,762 100 1,700 1,623 28 28 1,541 1,407 $235bn of deposits already 80 27 24 at or near zero interest rate 22 60 1,733 1,672 1,596 40 $125.8bn 1,517 1,385 $109.6bn $80.5bn 20 $28.6bn $20.1bn $10.9bn 0 Mar 19
Slide 72: Other Banking Products
OTHER BANKING PRODUCTS PERSONAL LENDING BALANCE AND MARKET SHARE1 CARDS BALANCE AND MARKET SHARE2,3 ($bn) ($bn) 13.3% 13.2% 13.2% 13.3% 9.9% 9.3% 9.1% 2.7 11.00% 8.9% 5.7 5.4 4.4 4.6 1.5 1.4 1.1 1.0 0.0 0.00% Sep 19 Mar 20 Sep 20 Mar 21 Sep 19 Mar 20 Sep 20 Mar 21 Personal Lending Market share Cards
Slide 73: Group Asset Quality
ADDITIONAL INFORMATION GROUP ASSET QUALITY
Slide 74: Group Credit Impairment Charge
GROUP CREDIT IMPAIRMENT CHARGE CREDIT IMPAIRMENT CHARGE AS % OF GLAs GFC 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% Late 80’s / Early 90’s 0.2% Recession -0.1% 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 Sep Mar 87 88 89 90 9
Slide 75: Group Estimated Long Run Loan Loss Rate 1985 to 2021
GROUP ESTIMATED LONG RUN LOAN LOSS RATE 1985 TO 2021 GROUP BUSINESS MIX – GLAs BY CATEGORY ESTIMATING LONG RUN LOAN LOSS RATE Personal lending 8% NAB Australian geography net write off rates as a Long run 1985 % of GLAs 1985 - 20202 average Home lending3 0.03% Home Commercial1 lending 16% 76% Person
Slide 76: Group Lending Mix
GROUP LENDING MIX GROSS LOANS AND ACCEPTANCES BY PRODUCT - $599BN GROSS LOANS AND ACCEPTANCES BY GEOGRAPHY1 Other International 3% Australia 83% Other term lending 38% New Zealand 14% Asset & lease financing 2% Overdrafts 1% GROSS LOANS AND ACCEPTANCES BY BUSINESS UNIT Credit card Other Housing loan
Slide 77: Group Provisions
GROUP PROVISIONS COLLECTIVE PROVISIONS SPECIFIC PROVISIONS ($m) ($m) 47.6% 1.56% 1,500 45.0% 50.00% 1.50% 39.7% 40.6% 1.21% 5,536 0.96% 5,209 $6,000.0 299 827 840 4,401 46 191 782 794 3,360 337 43 98 125 115 108 56 177 5,191 4,975 684 702 725 686 65 4,008 3,118 -1% $2,000.0 -100 Sep 19 Mar 20 Sep 20
Slide 78: ECL Assessment
ECL ASSESSMENT ECL SCENARIOS KEY CONSIDERATIONS • Modest underlying CP release reflecting improved Total Provisions for ECL1,2 environment and customer positions 1H21 $m (probability 100% Base 100% • Modest EA release reflecting upgraded economic case Downside assumptions partly offset by changes to
Slide 79: Target Sector FLAs Strengthened
TARGET SECTOR FLAS STRENGTHENED COLLECTIVE PROVISION TARGET SECTOR FLAS KEY COMMENTS ($m) 1,250 662 1,029 • Additional FLAs vs 2H20 reflect incremental forward looking stress beyond that captured for 458 total portfolio in EA top-up based on granular, bottom-up analysis 662 372 • Top-up to aviation
Slide 80: ECL Provisioning by Stages
ECL PROVISIONING BY STAGES LOANS AND ADVANCES BY STAGE1 PROVISIONS BY STAGE2 PROVISION COVERAGE BY STAGE3 ($bn) ($m) (%) 0.77 6,011 5,745 0.72 771 783 793 0.51 7 9 10 1,644 1,594 120 205 3,900 19.0 238 16.8 1,305 17.4 3,897 3,879 644 569 545 2,227 1.90 1.63 1.85 0.34 0.56 0.53 368 470 272 0.05 0.06
Slide 81: Probability of Default (PD) Analysis
PROBABILITY OF DEFAULT (PD) ANALYSIS NON RETAIL CORPORATE EAD1 BY PROBABILITY OF DEFAULT ($bn) Investment grade Sub investment grade Default 59% Mar 21 40% Mar 21 1% Mar 21 120 100 80 60 40 20 0 0<0.03% 0.03<0.11% 0.11<0.55% 0.55<2.00% 2.00<5.01% 5.01<99.99% 100% Mar 20 Sep 20 Mar 21 AUSTRALIAN AND
Slide 82: Business Lending Considerations
BUSINESS LENDING CONSIDERATIONS NON RETAIL EAD BY INDUSTRY1 - $520BN Performing2 Finance & insurance 32% 99.97% Commercial property 14% 99.57% Govt & public utilities 11% 100.00% Agri, forestry & fishing 9% 99.11% Transport & storage 5% 99.33% Other inc Health, Education, Community 5% Includes asset
Slide 83: Group Agriculture, Forestry & Fishing Exposures
GROUP AGRICULTURE, FORESTRY & FISHING EXPOSURES GROUP EAD $49.0BN MARCH 2021 KEY CONSIDERATIONS • The sector outlook continues to improve amid recent good rainfall and stronger than predicted commodity prices New • Asset quality remains sound with 90+ DPD and impaired rate improved Zealand over the
Slide 84: Group Commercial Real Estate
GROUP COMMERCIAL REAL ESTATE1 GROSS LOANS & ACCEPTANCES ASSET QUALITY New Aust Total Trend Mar 19 Sep 19 Mar 20 Sep 20 Mar 21 Zealand TOTAL CRE (A$bn) 51.6 7.1 58.7 Impaired loans ratio 0.22% 0.25% 0.26% 0.32% 0.30% Increase/(decrease) from 0.4 (0.4) (0.1) Sep 20 (A$bn) % of geographical GLAs 10.5%
Slide 85: Group Commercial Real Estate
GROUP COMMERCIAL REAL ESTATE1 BREAKDOWN BY TOTAL GROSS LOANS & ACCEPTANCES ($58.7BN) Geographic breakdown Borrower breakdown Sector breakdown QLD Retail 14% Residential 28% VIC WA 11% 26% 5% SA Investor 5% 90% Tourism Industrial Other & Leisure 17% Australia 3% Developer 5% 10% Other 7% New Zealand
Slide 86: Retail Trade
RETAIL TRADE1 EXPOSURE AT DEFAULT KEY CONSIDERATIONS • ~3% of non retail EAD EAD $14.5bn EAD $14.5bn EAD $14.5bn • Notwithstanding structural problems, the Retail Trade sector performed relatively well during COVID-19, as consumers continued 2.1 2.1 spending. Though some parts of sector have perform
Slide 87: Tourism, Hospitality and Entertainment
TOURISM, HOSPITALITY AND ENTERTAINMENT1 EXPOSURE AT DEFAULT KEY CONSIDERATIONS EAD $14.1bn EAD $13.5bn • ~3% of non retail EAD 1.9 1.9 • Industry outlook for Hospitality & Entertainment sectors continues to improve, reflecting growing confidence in COVID-19 tracking and 6.1 5.5 controls. The outlook
Slide 88: Air Travel and Related Services
AIR TRAVEL AND RELATED SERVICES EXPOSURE AT DEFAULT KEY CONSIDERATIONS • ~2% of non retail EAD EAD $11.3bn EAD $10.1bn • Portfolio comprises airlines which are usually national carriers and 0.7 0.7 sovereign owned, airports, lessors and service companies supporting the aviation industry 10.3 8.6 • O
Slide 89: Group Office, Retail, Tourism & Leisure Commercial Real Estate
GROUP OFFICE, RETAIL, TOURISM & LEISURE COMMERCIAL REAL ESTATE1 GLA PROFILE Limit utilisation ~86% KEY CONSIDERATIONS $35.5bn $35.9bn • Office, Retail and Tourism & Leisure (T&L) viewed as most impacted by COVID-19 across Group CRE portfolio 1.9 2.0 16.7 16.3 • 90+ DPD and impaired assets collective
Slide 90: Capital & Funding
ADDITIONAL INFORMATION CAPITAL & FUNDING
Slide 91: CRWA and Sensitivity
CRWA AND SENSITIVITY CREDIT RWA Credit quality & portfolio mix -$6.0bn ($bn) 9.0 (10.2) 2.3 (1.8) 4.1 (5.0) 2.0 (3.6) (2.6) 354.0 348.2 Sep 20 Volume Model and SME Overlay Non retail Non retail Other non Retail Derivatives Translation Mar 21 Methdology downgrades upgrades retail and FX Repurchase Ag
Slide 92: Group Basel III Capital Ratios
GROUP BASEL III CAPITAL RATIOS 23.98% 22.25% 19.66% 19.07% 17.97% 16.33% 17.01% 15.80% 14.35% 16.62% 17.90% 14.61% 13.20% 14.01% 11.96% 11.47% 12.37% 10.39% Mar 20 Sep 20 Mar 21 APRA Common Equity Tier 1 ratios APRA Tier 1 ratios APRA Total Capital ratios Equivalent Internationally Comparable ratios
Slide 93: Key Regulatory Changes Impacting Capital and Funding
KEY REGULATORY CHANGES IMPACTING CAPITAL AND FUNDING Change 2020 1H21 2H21 2022 2023 2024 Capital Adequacy Consult Finalise Implementation Measurement of Capital Consult Finalise Implementation Credit Risk Consult Finalise Implementation Operational Risk Implementation Market Risk Consult Implementa
Slide 94: Funding Profile
FUNDING PROFILE GROUP STABLE FUNDING INDEX (SFI)1 101% 98% 90% 91% 93% 93% 86% 23% 20% 20% 22% 24% 23% 20% 70% 69% 69% 70% 78% 78% 66% Sep 12 Sep 14 Sep 16 Sep 18 Sep 19 Sep 20 Mar 21 Customer Funding Index Term Funding Index 2 DEPOSIT COVEREDGROWTH BOND ISSUANCE 2 ($bn) Business & Private Banking 1
Slide 95: Loss Absorbing Capacity
LOSS ABSORBING CAPACITY LOSS ABSORBING CAPACITY APRA CHANGES TO MAJOR BANKS' CAPITAL STRUCTURES3 • Based on the Group’s RWA and Total Capital position as at 31 March 2021, the incremental Group Total Capital requirement prior to Total Capital 17.9% Total Capital 17.0% January 2024 is approximately $
Slide 96: Asset Funding
ASSET FUNDING FUNDED BALANCE SHEET1 SOURCE AND USE OF FUNDS ($bn) $782bn $782bn Use of funds Source of funds Short Term Wholesale, 11% Liquid Assets4, 22% Term Wholesale Funding <12 Months, 5% 8 Other Short Term Other Deposits3, 5% Assets 5, 2% 0 16 Business and Other Lending6, 11 32% Stable Custome
Slide 97: Liquidity
LIQUIDITY LIQUIDITY COVERAGE RATIO (QUARTERLY AVERAGE) NET STABLE FUNDING RATIO COMPOSITION ($bn) Group NSFR 122% as at 31 March 2021 126% LCR 136% LCR 139% LCR 136% LCR $546bn Wholesale $448bn Funding & Other - and 126 Liquids 137 Non-Financial Other Assets Corporate 88 98 Deposits 73 47 Other Loan
Slide 98: Liquidity Considerations
LIQUIDITY CONSIDERATIONS INCREASED SYSTEM LIQUIDITY AUSTRALIAN CORE FUNDING GAP1 APRA ($bn) ($bn) Methodology • Deposits increasing due to central bank and government response to 260 Change2 COVID-19 240 • Term Funding Facility provides a significant stable funding source 220 • Low rate environment
Slide 99: Term Wholesale Funding Profile
TERM WHOLESALE FUNDING PROFILE HISTORIC TERM WHOLESALE FUNDING ISSUANCE1 ($bn) 4.9 6.8 5.4 12.3 11.3 yrs yrs yrs yrs yrs 17 16 12 10 11 14 6 10 2 10 5 3 4 2 1H19 2H19 1H20 2H20 1H21 6 Tenor2,3,4 Secured Senior and Sub Debt RBA Term Funding Facility RBNZ Funding Facilities TERM FUNDING MATURITY PROFI
Slide 100: Diversified and Flexible Term Wholesale Funding Portfolio
DIVERSIFIED AND FLEXIBLE TERM WHOLESALE FUNDING PORTFOLIO 1H21 ISSUANCE BY PRODUCT TYPE 1H21 ISSUANCE BY CURRENCY AUD 33% Subordinated Public 75% 1 Senior Public Offshore 25% USD 67% OUTSTANDING ISSUANCE BY PRODUCT TYPE2 OUTSTANDING ISSUANCE BY CURRENCY2 USD 30% RMBS 2% JPY 3% Senior 67% Covered 20%
Slide 101: Funding Costs
FUNDING COSTS INDICATIVE TERM WHOLESALE FUNDING ISSUANCE COSTS1 TERM DEPOSIT PORTFOLIO COSTS2 (bps) 400 80 300 70 200 60 100 50 0 Sep 18 Mar 19 Sep 19 Mar 20 Sep 20 Mar 21 40 Mar 19 Sep 19 Mar 20 Sep 20 Mar 21 3 yr senior 5 yr senior 10yr senior 10NC5 Tier 2 DOMESTIC SHORT TERM WHOLESALE FUNDING COS
Slide 102: Capital & Deposit Hedges
CAPITAL & DEPOSIT HEDGES REPLICATING PORTFOLIO CAPITAL & DEPOSIT HEDGES – REPLICATING PORTFOLIOS1 3.0 Replicating portfolio 2.5 31 Mar 21 balance Avg investment term 2.0 Capital $41bn 2 years 1.5 Low rate deposits $57bn 5 years 1.0 Ave return of replicating portfolio 0.5 FY18 FY19 FY20 1H21 0.0 Mar
Slide 103: Economics
ADDITIONAL INFORMATION ECONOMICS
Slide 104: Australia and NZ Key Economic Indicators
AUSTRALIA AND NZ KEY ECONOMIC INDICATORS AUSTRALIAN ECONOMIC INDICATORS (%)1 NZ ECONOMIC INDICATORS (%)1 CY19 CY20 CY21(f) CY22(f) CY23(f) CY19 CY20 CY21(f) CY22(f) CY23(f) GDP growth2 2.3 -1.1 3.7 1.7 2.6 GDP growth2 1.7 -0.9 2.3 4.0 1.6 Unemployment3 5.2 6.7 5.1 4.7 4.4 Unemployment3 4.1 4.9 4.6 3
Slide 105: Activity Continues to Recover From the Impact of COVID-19
ACTIVITY CONTINUES TO RECOVER FROM THE IMPACT OF COVID-19 • Economic activity and the labour market have rebounded relatively quickly from the COVID-19 related fall in June 2020. GDP ended the GDP ENDED THE YEAR 1% LOWER1 (Ppt) (Ppt) year 1% lower, and is now expected to return to pre-COVID levels b
Slide 106: The Labour Market Has Recovered at a Relatively Quick Pace
THE LABOUR MARKET HAS RECOVERED AT A RELATIVELY QUICK PACE UNEMPLOYMENT HAS RECOVERED QUICKLY1 UNEMPLOYMENT HAS FALLEN ACROSS STATES1 (%) (%) 20 9 8 15 7 10 6 5 5 Unemployment Rate Underutilisation Rate 4 0 NSW VIC QLD SA WA TAS 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 3 Mar-
Slide 107: The Housing Market Has Strengthened
THE HOUSING MARKET HAS STRENGTHENED HOUSE PRICE GROWTH HAS BEEN STRONG1 RENTS GROWTH CONTINUES TO BE WEAK2 (%, 6MEA) Sydney Melbourne Brisbane Perth (%) 25 10 20 15 5 10 5 0 0 Sydney Melbourne -5 -5 Brisbane Perth -10 -15 -10 2013 2014 2015 2016 2017 2018 2019 2020 2021 2005 2007 2009 2011 2013 2015
Slide 108: Significant Policy Support During the Pandemic
SIGNIFICANT POLICY SUPPORT DURING THE PANDEMIC LARGE BUDGET DEFICITS EXPECTED IN THE NEAR TERM1 GOVERNMENT DEBT AT A LOW STARTING POINT2 ($B) Japan (%) Forward Italy Estimates United States 0 0 France Canada -3 -50 United Kingdom India Germany -6 -100 Malaysia $ Levels (RHS) China -9 -150 Australia
Slide 109: Global Recovery Underway
GLOBAL RECOVERY UNDERWAY CHINA’S ECONOMY BACK ON TRACK BY END 20201 BROADER GLOBAL RECOVERY CONTINUES BUT NOT (% yoy) SMOOTHLY DUE TO FURTHER COVID WAVES1 30 China total GDP and selected sectors Major advanced economy GDP (Q4 2019 = 100) 25 100 20 95 15 10 90 5 0 85 -5 80 -10 Manufacturing and const
Slide 110: New Zealand
NEW ZEALAND NZ GDP RECOVERY RELATIVELY RAPID BUT Q420 WEAK AND AGGREGATE MEASURES HIDE CHANGES – POPN GROWTH WELL LABOUR MARKET RECOVERY SLOW1 DOWN AND INTERNATIONAL TOURISM DEPRESSED2 ($NZ billion, chain prices) (%) (% change on previous qtr) ('000s) 70 6.0 NZ resident population Short term movemen
Slide 111: Other Information
OTHER INFORMATION
Slide 112: NAB Ventures and Innovation
NAB VENTURES AND INNOVATION NAB Ventures is NAB’s venture capital arm within the Strategy and Innovation division that makes investments to promote strategic priorities • Accelerates access to new innovative technology, intellectual property and business models, enhance insight and connectivity with
Slide 113: Investment Spend & Capitalised Software
INVESTMENT SPEND & CAPITALISED SOFTWARE INVESTMENT SPEND – OPEX AND CAPEX ($m) 915 696 655 654 56% 510 46% 47% 39% 39% 54% 44% 53% 61% 61% Mar 19 Sep 19 Mar 20 Sep 20 Mar 21 Opex Capex CAPITALISED SOFTWARE – BALANCE AND AMORTISATION PROFILE ($m) 1,955 1,810 1,922 Spot implied useful life of software
Slide 114: Group Cash Earnings Reconciliation to Statutory Net Profit
GROUP CASH EARNINGS RECONCILIATION TO STATUTORY NET PROFIT • NAB uses cash earnings (rather than statutory net profit attributable to owners of NAB) for its internal management reporting purposes and considers it a better reflection of the Group’s underlying performance. Accordingly, information is
Slide 115: Abbreviations
ABBREVIATIONS CET1 Common Equity Tier 1 Capital LCR Liquidity Coverage Ratio CIC Credit impairment charge LGD Loss given default CLF Committed Liquidity Facility LVR Loan to Value Ratio CP Collective Provision MTM Mark to market CTI Cost to income ratio NBI Non Bearing Interest DPD Days Past Due NCO
Slide 116: Disclaimer
DISCLAIMER The material in this presentation is general background information about the NAB Group current at the date of the presentation on 6 May 2021. The information is given in summary form and does not purport to be complete. It is intended to be read by a professional analyst audience in conj
National Australia Bank — Investor Presentation (May 2021) on 6ix