National Australia Bank Limited · ASX:NAB
National Australia Bank — H1 2023 Earnings Presentation
128 slides from National Australia Bank's earnings presentation, May 4, 2023
Slide 1: Half Year Results 2023 Investor Presentation
national australia bank Half Year Results 2023 Investor Presentation 4 May 2023 Ross McEwan Group Chief Executive Officer Gary Lennon Group Chief Financial Officer ©2023 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686
Slide 2: NAB 2023 Half Year Results Index
NAB 2023 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 128 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 • Strong 1H23 financial performance across our businesses delivering improved returns to shareholders • Increase in cash rates expected to slow economy – well positioned to support customers with a strong balance sheet • Continued growth in Business & Private Banking and other target se
Slide 5: Strong financial results
Strong financial results Metric 1H23 2H22 1H23 v 2H22 Statutory net profit ($m) 3,967 3,340 18.8% Continuing operations1 Net operating income ($m) 10,529 9,468 11.2% Operating expenses ($m) (4,421) (4,311) 2.6% Underlying profit ($m) 6,108 5,157 18.4% Cash earnings2 ($m) 4,070 3,624 12.3% Dividend (
Slide 6: Strong earnings growth across all businesses
Strong earnings growth across all businesses Underlying divisional profit ($m) Business and Private Banking Personal Banking Corporate and Institutional New Zealand Banking1 Banking 14.8% 10.1% 20.1% 11.0% 2,700 2,352 1,168 1,286 1,272 1,167 1,059 1,051 2H22 1H23 2H22 1H23 2H22 1H23 2H22 1H23 (1) Ne
Slide 7: Delivering improved shareholder returns
Delivering improved shareholder returns Cash Return on Equity Basic Cash EPS Cents 130 115 114 102 107 98 13.7% 85 70 12.4% 11.7% 10.7% 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 8.3% Dividends per share Cents 83 83 78 73 67 60 30 30 FY19 FY20 FY21 FY22 1H23 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 7
Slide 8: Maintaining strong balance sheet settings
Maintaining strong balance sheet settings 1 Regulatory liquid assets • Strong funding and liquidity position ($bn) 202 ~$47bn • Over 80% of GLAs funded by customer deposits 4 surplus to regulatory 144 • Capital ratios remain strong, benefiting from 33 bps of 82 minimum organic capital generated in 1
Slide 9: Well provisioned with a disciplined approach to risk
Well provisioned with a disciplined approach to risk Strong provisioning High quality Australia housing book2 CP/CRWA Mar 23 negative equity ex LMI 0.7% Mar 23 includes $1.5bn of additional forward looking provision vs Sep 19 48% % with Negative Equity Average DLVR 1.42% 45% 1 42% 43% 0.07% 2.9% 38%
Slide 10: We have a clear long-term strategic ambition
We have a clear long-term 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 Relationsh
Slide 11: Focus on colleagues
Focus on colleagues Colleague engagement score stable – more to do • Continuing to invest in developing the skills and capability of our colleagues • Leadership tools and disciplines being embedded across the organisation • Engaging with colleagues and the Finance Sector 73 76 77 783 Union on a revi
Slide 12: Focus on customers
Focus on customers Net Promoter Score (NPS) relative to Major Bank peers #2 Consumer1 #2 in Business2 #1 in High Net Worth & Mass Affluent3 9 -2 -1 5 -4 -4 -1 -10 -10 -3 -10 -11 Mar 22 Sep 22 Mar 23 Mar 22 Sep 22 Mar 23 Mar 22 Sep 22 Mar 23 NAB Peer 1 Peer 2 Peer 3 NAB Peer 1 Peer 2 Peer 3 NAB Peer
Slide 13: Focused on initiatives to help keep customers safe
Focused on initiatives to help keep customers safe Accelerating our efforts to protect customers against scams and fraud Scam cases impacting our Scams and fraud customers per month customer enquiries1 Working with telcos on Delivering proactive per month spoofing scams customer alerts 100% 129% • W
Slide 14: Delivering growth across our core SME franchise
Delivering growth across our core SME franchise Consistent focus on relationship banking increasingly enabled by digital, data and analytics Growing business lending Growing business deposits • Market share gains in small • Faster, more seamless process for banker- 17.3% assisted TD origination with
Slide 15: Driving growth in target segments
Driving growth in target segments High Net Worth (Private Bank Unsecured lending and JBWere) • Integrated strategy delivering • Combined NAB and Citi Consumer • Growing in target customer segment strong lift in business referred Business capabilities delivering account with 95k net new customers in
Slide 16: Navigating a challenging home lending environment
Navigating a challenging home lending environment Market context driving intense pricing competition Key priorities in home lending Cash rate increases flowing to higher mortgages • Supporting mortgage customers facing increased cost of repayments living pressures (Avg monthly repayment increase in
Slide 17: 1H23 Financials
1H23 Financials Gary Lennon Group Chief Financial Officer
Slide 18: Group Financial Results
Group Financial Results Underlying profit ($m) Cash earnings1 ($m) Statutory profit ($m) 18.4% 12.3% 18.8% 6,108 4,070 3,967 5,157 3,624 3,340 2H22 1H23 2H22 1H23 2H22 1H23 P&L key financial indicators 1H23 ($m) 1H23 v 2H22 Net operating income 10,529 11.2% ex Markets & Treasury 9,618 8.7% Operating
Slide 19: Strong revenue growth
Strong revenue growth Net operating income ($m) HoH revenue increase 11.2% (8.7% ex M&T) 52 (15) 289 587 148 10,240 10,529 9,468 8,828 Mar 22 Sep 22 Volumes Margin Fees & Other Mar 23 M&T 1 Mar 23 Commissions (Ex M&T) Markets & Treasury (M&T) income breakdown Key revenue drivers HoH ($m) 1,828 • NII
Slide 20: Net interest margin
Net interest margin Net interest margin Primarily OOI offset Includes 5bps (Aust) and 2bps (NZ) impact from higher Primarily HL replicating portfolio returns competition 0.04% (0.03%) 0.17% (0.07%) (0.01%) 1.80% 1.77% 1.63% 1.67% Includes 12bps (Aust) and 5bps (offshore) impact from unhedged balance
Slide 21: Operating expenses
Operating expenses Operating expenses (HoH) ($m) Total expenses up 2.6% HoH (ex Citi 1.2%) 92 19 (142) 47 60 (94) 103 25 4,311 4,421 3,963 Mar 22 Sep 22 Salary Volume related Technology Depreciation & Productivity Other Citi 1 EU & Mar 23 increases & investment Amortisation Remediation Investment sp
Slide 22: Increase in CICs and stabilising asset quality
Increase in CICs and stabilising asset quality Credit impairment charge (CIC) Key 1H23 drivers ($m) 0.54% 0.38% 0.11% 0.60% • Underlying CIC of $461m reflecting lower house prices, volume 0.16% (0.04%) (0.03%) 0.00% 0.04% 1,601 growth and modest increase in specific provision charges 1,600 0.00% 1,1
Slide 23: Strong provisioning maintained
Strong provisioning maintained Collective provision balances Collective provision coverage ($m) Impact of RCF2 7bps Mar 23 includes $1.5bn of additional forward looking provision vs Sep 19 1.56% 1.35% 1.42% 1.31% 5,536 4,715 5,056 4,826 0.96% 0.93% 3,360 1,565 0.75% 1,781 0.70% 0.72% 97 1,511 1,744
Slide 24: Australian housing lending $333bn
Australian housing lending $333bn1 Cash rate increases now more meaningful to customer Fixed Rate (FR) home loan expiry profile repayments2,3 ($bn) ($) ~$32bn expired 12 mths to Mar 23 Increase in avg VR P&I Increase in avg FR Early arrears trends broadly monthly repayments monthly repayments consis
Slide 25: Group non retail EAD $615bn
Group non retail EAD $615bn1 Non retail asset quality sectors of interest $84bn EAD EAD1 90+ DPD and GIA % of EAD change Mar 23 EAD FLA since • Closely monitoring exposures to 2% $bn1 Mar 20 $m sectors most challenged by higher % interest rates and inflation and Retail Trade 15.0 2.7% 67 softening c
Slide 26: Capital remains above target range
Capital remains above target range Group Basel III Common Equity Tier 1 capital ratio (%) Organic capital generation +33bps (+26bps ex Other RWA) (0.55) 0.47 0.90 (0.09) 0.07 (0.13) 0.03 12.21 11.51 2 Sep 22 Cash Dividend Credit RWA 1 Other RWA Share Other Revised Capital Mar 23 earnings buy-back Fr
Slide 27: Funding and liquidity well placed
Funding and liquidity well placed Key messages Liquidity position well above regulatory minimums • Strong funding and liquidity position, well above regulatory (%) RSF impact of minimums TFF1 ~3.7% • Total regulatory liquid assets of $202bn, including $47bn 100% minimum above the minimum regulatory
Slide 28: Closing comments
Closing comments Ross McEwan Group Chief Executive Officer
Slide 29: Australian economy to slow but remain resilient
Australian economy to slow but remain resilient Cautiously optimistic about the outlook, although GDP1 is 7.2% above pre-COVID-19; growth is slowing but downside risks remain expected to remain positive (Index December quarter 2019 = 100) • Some customers more impacted by higher cost of living Forec
Slide 30: Disciplined execution of our strategy to deliver long-term growth
Disciplined execution of our strategy to deliver long-term growth Key priorities in FY23 are aligned to our long-term Our long-term strategy - “What we will be known for” strategy • Support our customers and colleagues Relationship-led • Relationships are our strength • Retain balance sheet strength
Slide 31: Additional Financial Information
Additional Financial Information
Slide 32: NAB at a glance
NAB at a glance % of 1H23 Cash Key Financial Data 1H23 Cash earnings divisional split1 Earnings Business and Private Banking 42% Cash Earnings1 $4,070m Personal Banking 19% Cash ROE 13.7% Corporate and Institutional Banking 23% Gross Loans & Acceptances $701bn New Zealand Banking 19% Customer deposi
Slide 33: Divisional contributions
Divisional contributions Cash Earnings Underlying Profit Divisional cash earnings1 1H23 ($m) 1H23 v 2H22 1H23 ($m) 1H23 v 2H22 Business and Private Banking 1,714 8.2% 2,700 14.8% Personal Banking 785 (2.2%) 1,286 10.1% Corporate and Institutional Banking 940 14.4% 1,272 20.1% New Zealand Banking2 82
Slide 34: Markets & Treasury income
Markets & Treasury income Markets & Treasury income breakdown ($m) 1,250 838 808 911 578 753 622 888 580 453 392 369 478 277 206 262 402 387 345 401 407 362 366 397 (17) (86) 0 71 (17) (37) 26 8 Sep 19 Mar 20 Sep 20 Mar 21 Sep 21 Mar 22 Sep 22 Mar 23 3 Derivative valuation adjustment 1 Customer risk
Slide 35: Customer-related and payroll remediation
Customer-related and payroll remediation Customer-related remediation provision charges1 ($m) 1H23 Continuing Operations 1,189 charges of $45m relates to banking matters - both higher cost to do and customer 749 payments 1,011 380 654 268 240 137 138 245 58 21 143 45 95 178 135 117 130 31 21 97 45 2
Slide 36: AUSTRAC Enforceable Undertaking
AUSTRAC Enforceable Undertaking Overview of Enforceable Undertaking Status as at March 2023 Following its investigation, AUSTRAC accepted an An External Auditor was appointed in May 2022 and will Enforceable Undertaking (EU) from NAB in April 2022 to lift its report to NAB and AUSTRAC periodical
Slide 37: Group cash earnings reconciliation to statutory net profit
Group cash earnings reconciliation to statutory net profit NAB uses cash earnings (rather than statutory net profit attributable to owners of NAB) for its internal management reporting purposes and considers it a better reflection of the Group’s underlying performance. Accordingly, information is
Slide 38: Additional information
Additional information – We Have Clear Growth Opportunities 39 – Business and Private Banking 41 – Personal Banking 45 – Corporate and Institutional Banking 48 – New Zealand Banking 52 – NAB Ventures 57
Slide 39: We have clear growth opportunities
We have clear growth opportunities Corporate and Business and Private Personal Banking Institutional BNZ ubank Banking Banking Clear market leadership Simple & digital Disciplined growth Grow in personal New customer & SME acquisition • Industry-leading relationship • Investing in professional • Hig
Slide 40: Underpinned by strong tech foundations and strategy
Underpinned by strong tech foundations and strategy Focused on better outcomes for our customers and colleagues Our Tech Strategy pillars 1H23 outcomes • New credit and debit cards added to a digital wallet within minutes of approval via mobile app Digital First • Improved home loan management tools
Slide 41: Business and Private Banking
Business and Private Banking Cash earnings and revenue Net interest margin ($m) 25.2% (11.6% HoH) 19.9% (8.2% HoH) 3.27% 4,152 3.00% 3,315 3,721 2.85% 2.82% 1,429 1,584 1,714 1H22 2H22 1H23 1H22 2H22 1H23 Sep 21 Mar 22 Sep 22 Mar 23 Cash Earnings Total revenue Net interest margin Business and housin
Slide 42: Business lending growth and market share
Business lending growth and market share Australian business lending growth (YoY)1 18% ~1x 16% 14% 12% 10% 8% 6% 13.5% 10.5% 10.7% 10.3% 4% 7.3% 7.6% 2% 5.7% 0% 3 3 2 Agri Health CRE Other NAB NAB (RBA SME) System (RBA SME) B&PB 3 $42bn $9bn $32bn $54bn $137bn Denotes lending balance as at 28 Feb 20
Slide 43: Making payments easier for SMEs
Making payments easier for SMEs NAB Flex-Flow Loan for merchants launched NAB Easy Tap • Fast and flexible cashflow loans for existing merchant • Turns a merchant’s Android phone into an EFTPOS customers who settle into a NAB transaction account1 reader to accept contactless card payments • Customer
Slide 44: Integrated Private Wealth offering
Integrated Private Wealth offering Growth in home lending Growth in deposit • An integrated offer bringing together banking, balances balances investments and advice for high net worth (HNW) 2.7x system growth in 1H232 3.5x system growth in 1H232 customers ($bn) ($bn) • Above system growth in home l
Slide 45: Personal Banking
Personal Banking Cash earnings and revenue Net interest margin ($m) (%) 18.1% (7.2% HOH) -0.4% (-2.2% HOH) 2,401 2,573 2.08% 2,178 2.01% 1.99% 788 803 785 1.93% 1H22 2H22 1H23 1H22 2H22 1H23 Sep 21 Mar 22 Sep 22 Mar 23 Net interest margin Cash Earnings Total revenue Housing lending GLAs and deposits
Slide 46: Building a simple and digital Personal Bank
Building a simple and digital Personal Bank Increasing # digitally active Ongoing increase in digital sales Ongoing enhancements to digital customers, largely using mobile and self-service functionality Digitally active NAB banking Simple everyday banking products • Improved home loan management cus
Slide 47: Update on Citi Consumer Business acquisition
Update on Citi Consumer Business acquisition Ambition to deliver market leading capability in unsecured lending 1H23 Update • Combined NAB and Citi Consumer Business capabilities • Integration of High Net Worth colleagues into NAB Private delivering account growth across both businesses Wealth compl
Slide 48: Corporate and Institutional Banking
Corporate and Institutional Banking Cash earnings and revenue Credit impairment charges and as a % of GLAs ($m) ($m) 15.1% (14.7% HOH) 0.44% (0.03%) (0.01%) 0.05% 16.6% (14.4% HOH) -0.20% 305 248 1,994 (7) 25 1,732 1,739 -2.00% (17) (19) -45 806 822 940 Sep 21 Mar 22 Sep 22 Mar 23 1H22 2H22 1H23 1H2
Slide 49: Disciplined growth in Corporate and Institutional Banking
Disciplined growth in Corporate and Institutional Banking Managing GLA outcomes Disciplined capital usage2 ($bn) ($bn) Key drivers of lower GLAs include Funds & 122 Securitisation 116 118 115 109 113 105 103 113 115 109 91 90 91 79 Sep 21 Mar 22 Sep 22 Mar 23 Mar 22 Sep 22 Mar 23 Spot RWA Spot RWA e
Slide 50: Corporate and Institutional Banking customer metrics
Corporate and Institutional Banking customer metrics Large Corporate and Institutional – Interest Rate Hedging - Foreign Exchange – Relationship Strength Index1 Relationship Strength Index2 Relationship Strength Index3 630 650 640 600 600 580 560 550 530 520 500 480 480 440 450 2016 2017 2018 2019 2
Slide 51: Business highlights
Business highlights Strategy to acquire • Focus on integration and growth in 2023 new customers and deliver a market • 75% of original UBank customers upgraded to new leading digital platform1 experience • $2.6bn deposit growth during 1H23 and total deposits of $17bn – 4.8x system growth2 Acquiring
Slide 52: New Zealand Banking
New Zealand Banking1 Cash earnings and revenue Net interest margin (NZ$m) (%) 18.6% (8.7% HoH) 23.5% (12.2% HoH) 2.57% 1,594 1,733 2.38% 1,461 2.29% 2.36% 735 825 668 1H22 2H22 1H23 1H22 2H22 1H23 Sep 21 Mar 22 Sep 22 Mar 23 Cash Earnings Total revenue Business and housing lending GLAs Credit impair
Slide 53: New Zealand Banking customer metrics
New Zealand Banking customer metrics BNZ Consumer NPS1,3,4,5 BNZ Business NPS2,3,6 BNZ Large Corporate Relationship Strength Index (RSI)7 40 25 650 15 600 594 30 31 5 -3 546 24 550 20 -5 -8 544 16 -15 500 10 10 -16 -25 450 451 0 -35 -33 400 Mar 19 Mar 21 Mar 23 Mar 19 Mar 21 Mar 23 2017 2018 2019 20
Slide 54: New Zealand lending mix
New Zealand lending mix Portfolio breakdown – Total NZ$101.6bn Mortgage portfolio breakdown by geography - Total NZ$56.4bn Other 13% Gisborne, Hawkes Commercial Bay & Northland 4% Auckland 48% Real Estate Mortgages 8% 56% Bay of Plenty 5% Waikato 8% Agriculture, Wellington Forestry and 11% Fishing C
Slide 55: New Zealand housing lending key metrics
New Zealand housing lending key metrics New Zealand Housing Lending Portfolio Sep 21 Mar 22 Sep 22 Mar 23 Mar 22 Sep 22 Mar 23 Drawdowns1 Total Balances (spot) NZ$bn 52.7 54.5 54.8 56.4 7.4 5.4 5.7 By product - Variable rate 11.3% 10.6% 9.7% 8.9% 12.8% 13.9% 10.1% - Fixed rate 87.3% 88.0% 88.8% 89.6
Slide 56: NZ customer deposits by interest rate
NZ customer deposits by interest rate Customer deposits balances by product (NZD) ($bn) 29.7 27.1 12.4 17.6 16.7 17.2 16.4 15.7 15.8 9.6 10.7 10.2 15.5 13.2 23.9 24.8 2.4 2.5 2.6 2.6 Sep 21 Mar 22 Sep 22 Mar 23 Sep 21 Mar 22 Sep 22 Mar 23 Sep 21Mar 22Sep 22Mar 23 Sep 21 Mar 22 Sep 22 Mar 23 Sep 21 M
Slide 57: Innovating with NAB Ventures
Innovating with NAB Ventures NAB’s venture capital arm that makes investments to promote strategic priorities The NAB Ventures team: • Works alongside other parts of the bank • Manages over 20 investments • Made three new investments in that incubate and test innovative new spread across our innovat
Slide 58: Additional product information: Australian Business Lending
Additional product information Australian Business Lending
Slide 59: Business lending asset quality
Business lending asset quality Business lending credit impairment charge and as a Business lending 90+DPD and GIAs and as % of GLAs % of GLAs ($m) ($m) 0.57% 0.56% 0.62% 0.54% 600 Includes $248m500of 0.15% Aviation sale (0.01%) 0.07% 400 related CICs 0.25% 300 200 1,362 1,343 1,328 1,386 274 100 189
Slide 60: Business and Private Banking asset quality
Business and Private Banking asset quality B&PB credit impairment charge and as % of GLAs1 B&PB 90+DPD and GIAs and as % of GLAs1 ($m) ($m) 0.21% 0.07% 0.04% (0.02%) 252 1.25% 0.10% 1.07% $290.0 0.91% 0.87% 23 2,596 2,382 2,156 2,142 87 161 -0.15% 39 1,351 (27) 0 1,168 999 904 6 40 68 92 7 5 (7) (5)
Slide 61: Business and Private Banking business lending $137bn
Business and Private Banking business lending $137bn1 Well diversified EAD by industry Well diversified Agriculture, Forestry & Fishing within sectors Transport & Storage 3% 26% Finance & Insurance 3% Accommodation, Cafes, Pubs & Restaurants 3% Commercial Property Health and Community 25% Services 5
Slide 62: Additional product information: Australian Housing Lending
Additional product information Australian Housing Lending
Slide 63: Housing lending portfolio profile
Housing lending portfolio profile Housing lending flow movements1 Housing lending volume growth1 ($bn) ($bn) Owner Occupier Investor 3.5% (1.1% HoH) 3.4% (1.5% HoH) (4) (12) 43 (23) 329 333 210.1 215.2 217.5 111.4 113.5 115.2 Sep 22 New fundings Interest Pre- External Mar 23 Mar 22 Sep 22 Mar 23 Mar
Slide 64: Housing lending portfolio profile
Housing lending portfolio profile Housing lending volume by borrower and repayment Australian mortgages profile1,2 type1 VIC/TAS 32% Investor Principal & Interest, 24.0% QLD 14% Investor Interest Only, 11.4% Owner Occupier WA 7% Principal & NSW/ACT Interest, 43% SA/NT 4% Owner Occupier 61.6% Interes
Slide 65: Housing lending portfolio profile
Housing lending portfolio profile Offset and redraw balances multiple of monthly Dynamic LVR breakdown of drawn balance2 repayments1 80% 36% 36% 13% 14% 19% 18% 60% Mar 23 Dynamic LVR 42.6% 13% 13% 11% 11% 6% 6% 2% 2% 40% > 1-2 3-12 1-3 <1 On time Behind 2 years years months months month 20% Sep 22
Slide 66: Housing lending fixed rate portfolio profile
Housing lending fixed rate portfolio profile1 Fixed rate (FR) lending book FR housing lending volume by borrower and repayment type • $94bn FR book, rolls to VR loan at expiry, and ~88% to expire over the next two years Investor Principal & • 66% originated since Oct 20 Interest, • Proactive custome
Slide 67: Housing lending practices & policies
Housing lending practices & policies Key origination requirements Loan-to-value (LVR) limits • Income verified using a variety of documents including Principal & Interest – Owner Occupier 95% payslips and/or checks on salary credits into customers’ accounts Principal & Interest – Investor 90% • 10%
Slide 68: Housing lending key metrics
Housing lending key metrics1 Australian Housing Lending Sep 21 Mar 22 Sep 22 Mar 23 Mar 22 Sep 22 Mar 23 Portfolio Drawdowns2 Total Balances (spot) $bn 309 322 329 333 49 42 35 Average loan size $’000 per account 315 324 334 345 468 489 526 By product type - Variable rate 61.3% 58.7% 63.4% 68.4% 53.
Slide 69: Housing lending repayment profile
Housing lending repayment profile Key considerations Profile of forecast mortgage repayments at 3.85% cash rate1,2,3 • All variable rate (VR) loan repayments were reviewed at Repayment profile from April 22 FR expiring least once by early Jan 23 with payments adjusted where VR P&I4 at 3.85% cash rat
Slide 70: Our ambition to build Australia's simplest home loan
Our ambition to build Australia’s simplest home loan Simple home loans (SHL): A digital end-to-end platform with ‘intervention by exception’ 1H23 update • B&PB rollout progressing well with ~40% of banker flow now • Broker foundation work complete and now progressively submitted via SHL scaling volu
Slide 71: Additional product information: Other Australian Products
Additional product information Other Australian Products
Slide 72: Deposits & transaction accounts
Deposits & transaction accounts1 Customer deposit balances by product ($bn) 141 142 139 10 128 13 10 8 143 146 149 128 132 129 127 139 132 120 86 96 42 47 48 41 34 38 41 42 Sep 21Mar 22Sep 22 Mar 23 Sep 21Mar 22 Sep 22Mar 23 Sep 21Mar 22 Sep 22Mar 23 Sep 21 Mar 22Sep 22Mar 23 Sep 21Mar 22Sep 22Mar 2
Slide 73: Other banking products
Other banking products Personal lending balance Cards balance and market share2,3 ($bn) ($bn) 25.3% 25.7% 22.00% 13.4% 13.5% 6.0 8.01 8.3 11.00% 1.61 1.8 1.0 4.2 4.4 1.0 0.0 0.00% Sep 21 Mar 22 Sep 22 Mar 23 Sep 21 Mar 22 Sep 22 Mar 23 Cards Market share Cards2 and personal lending 90+DPD and as a %
Slide 74: Additional information: Group Asset Quality
Additional information Group Asset Quality
Slide 75: Group credit impairment charge
Group credit impairment charge Credit impairment charge as % of GLAs Global 1.4% Financial Crisis 1.2% 1.0% 0.8% 0.6% 0.4% Late 80’s / Early 90’s 0.11% 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
Slide 76: Group estimated long run loan loss rate
Group estimated long run loan loss rate Group business mix – GLAs by category Estimating long run loan loss rate NAB Australian Long run Long run 1985 average average Personal geography net write off rates as a % of GLAs (1985 – 20222) (2003 – 20222) lending 8% Home lending3 0.03% 0.03% Home Commerc
Slide 77: Group lending mix
Group lending mix Gross loans and acceptances by product - $701bn Gross loans and acceptances by geography1 Other International 3% Australia 83% Credit card outstandings 1% Housing loans Overdrafts 1% 57% New Zealand 14% Asset & lease financing 2% Gross loans and acceptances by business unit Other 2
Slide 78: Group provisions
Group provisions Collective provisions Specific provisions Excluding the impact of NZ exposures affected by ($m) ($m) 1 recent severe weather events classified as 1.31% 1.42% “Restructured loans” this ratio would be 51.1%. 1.35% 1.31% Collective provisions are held against these loans 4,715 4,634 4,
Slide 79: Provisions
Provisions Movement in provisions1 ($m) 6000 5500 37 (91) 6 362 5000 4500 4000 3500 5,027 5,056 5,370 3000 2500 2000 Total Provisions Total Provisions Underlying Forward Looking Target sector Specific provision Total Provisions Mar 22 Sep 22 collective provision Economic Forward Looking Mar 23 Adjus
Slide 80: Expected Credit Losses assessment
Expected Credit Losses (ECL) assessment ECL scenarios & weightings Key considerations Total Provisions for ECL1,2 • Increase in ECL vs Sep 22 reflects growth for business 1H23 lending portfolio in Business & Private Banking and $m 100% Base 100% (probability weighted) case Downside the impact of low
Slide 81: Target sector FLAs
Target sector FLAs Collective provision target sector FLAs ($m) 1,250 1,029 458 845 781 372 182 155 168 591 133 147 500 128 48 202 81 150 52 160 135 41 89 95 70 64 139 136 127 115 80 88 62 67 190 170 177 179 173 166 25 25 59 58 14 16 Sep 20 Mar 21 Sep 21 Mar 22 Sep 22 Mar 23 Other Commercial Propert
Slide 82: ECL provisioning by stages
ECL provisioning by stages Loans and advances by stage1,2 Provisions by stage3 Provision coverage by stage4 ($bn) ($m) (%) 930 0.58 0.55 0.58 871 913 5,027 5,056 5,370 6.4 6.5 6.7 234 243 1,388 1,332 1,368 269 21.5 20.6 20.3 672 679 3,375 3,276 3,503 596 1.26 1.40 1.44 0.42 0.41 0.43 264 448 499 0.0
Slide 83: Probability of default analysis
Probability of default (PD) analysis Non-retail IRB EAD1 by probability of default 2,3 ($bn) Investment grade Sub investment grade Default 68% Mar 23 31% Mar 23 0.6% Mar 23 200 150 100 50 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% Sep 21 Mar 22 Sep 22 Mar 23 Australia and
Slide 84: Non retail industry sector analysis
Non retail industry sector analysis Non retail EAD by industry1,2 - $615bn % of 90+ DPD and GIA Mar 22 Sep 22 Mar 23 Finance & insurance 38% 0.02% 0.02% 0.02% Commercial property 13% 0.33% 0.30% 0.26% Govt & public utilities 11% 0.00% 0.00% 0.00% Agri, forestry & fishing 0.47% 0.57% 0.87% 10% Other
Slide 85: Agriculture, forestry & fishing exposures
Agriculture, forestry & fishing exposures1 Group EAD $59.2bn March 2023 Key considerations • Sector outlook is broadly positive (albeit with increasing volatility) in terms of main agricultural commodity prices, but headwinds exist in terms of elevated energy and fertiliser costs, labour shortages a
Slide 86: Commercial real estate
Commercial real estate (CRE)1 Gross loans & acceptances (GLAs) Breakdown by total GLAs ($66.1bn) New By sector By geography Aust Total2 Zealand QLD Retail Residential 15% WA Total CRE (A$bn) 58.8 7.3 66.1 VIC 27% 12% 5% SA 24% Increase/(decrease) from 5% 0.1 0.2 0.2 Industrial Sep 22 (A$bn) Tourism
Slide 87: Commercial real estate
Commercial real estate1 Key asset quality considerations Group CRE Security Profile2 • Market participants continue to seek more stabilised Partially secured conditions to reassess investment opportunities and 7% development starts Unsecured 4% • In response to the higher interest rate environment m
Slide 88: Construction
Construction1 Exposure at default Key considerations • Elevated shipping costs and supply chain issues are starting to moderate; labour shortages and costs remain a challenge EAD $12.7bn EAD $12.8bn • ~2% non retail EAD including subcontractors and construction services 1.8 2.1 • Highly diversified
Slide 89: Retail Trade
Retail Trade1 Exposure at default Key considerations • Consumption and spending on retail trade has generally EAD $15.6bn been resilient to date, though growth has slowed recently EAD $15.0bn • Higher official interest rates are likely to put pressure on 2.2 2.3 disposable income and lead to reduced
Slide 90: Tourism, hospitality and entertainment
Tourism, hospitality and entertainment1 Exposure at default Key considerations • Industry data suggests performance for Tourism and EAD $14.2bn EAD $13.5bn Entertainment remains robust, notwithstanding wage/electricity cost increases 1.8 1.9 • Consumer confidence, discretionary spending, higher cost
Slide 91: Australia Energy
Australia Energy1 Exposure at default Key considerations Sep 22 Mar 23 • While the outlook for domestic energy prices remains elevated, it is lower than that forecast in September 2022, driven by EAD EAD $16.4bn EAD Federal Government Policy intervention in December 2022 and $15.0bn the global easin
Slide 92: Additional information: Capital, Funding & Liquidity
Additional information Capital, Funding & Liquidity
Slide 93: Credit risk-weighted assets
Credit risk-weighted assets Credit risk-weighted assets ($bn) (17.8) 3 (4.2) 5.3 (0.5) 3.2 367.3 356.3 Sep 22 Transition to Revised Volume Models & Asset Quality Derivatives and Translation FX Mar 23 Capital Framework Methodology Repurchase Agreements 93
Slide 94: IRRBB risk-weighted assets
IRRBB risk-weighted assets Key messages Embedded Gain/Loss RWA Run off profile (Based on yield curves as at 31 Mar 23) • The Investment Term of Capital (IToC) smooths the impact of interest ($bn) rate volatility on NAB’s NIM and earnings profile. NAB currently applies a 3 year IToC Expected run off
Slide 95: Capital & Deposit hedges
Capital & Deposit hedges NAB replicating portfolios NAB replicating portfolios1 (%) Replicating portfolio Avg return of replicating portfolio 4.0 31 Mar 23 balance Invested out to term of 1H22 2H22 1H23 0.75% 1.05% 1.48% Capital AUD $42bn 3 years 3.0 Low rate deposits AUD $78bn 5 years 2.0 BNZ repli
Slide 96: Transition to the Revised Capital Framework
Transition to the Revised Capital Framework Migration to revised capital framework reduced credit RWA by $17.8bn (or +47bps of CET1) Mortgages Income Producing Real Estate (IPRE) and Corporate Lending • Lower risk (Owner Occupier, P&I) mortgages attract 1.4x • Income Producing Real Estate ‘Slotting’
Slide 97: Key Adjustments for Internationally Comparable Ratio
Key Adjustments for Internationally Comparable Ratio 27.3% 26.0% 26.0% 20.0% 19.5% 19.1% 17.9% 17.3% 16.9% 18.6% 18.2% 19.8% 12.5% 14.1% 13.1% 13.9% 11.5% 12.2% 1 2 Mar 22 1 Sep 22 Mar 23 APRA Common Equity Tier 1 ratios APRA Tier 1 ratios APRA Total Capital ratios Equivalent Internationally Compara
Slide 98: Key regulatory changes impacting capital and funding
Key regulatory changes impacting capital and funding Change CY23 CY24 CY25 CY26 Capital Adequacy (APS 110) Implemented 1 January Credit Risk (APS 112/113) Implemented 1 January Operational Risk (APS 115) (implemented) 1 Market Risk (APS 116) Consult Implementation Implementation Counterparty Credit
Slide 99: Loss-absorbing capacity
Loss-absorbing capacity • Based on the Group’s RWA and Total Capital position as NAB Tier 2 outstanding issuance at 31 Mar 23, NAB has met the interim Group Total Capital requirement for Jan 24, and has an incremental $2.8bn AUD requirement by Jan 26 37% • $4.8bn of NAB’s existing Tier 2 Capital has
Slide 100: Asset Funding
Asset Funding1 Funded balance sheet2 Group source and uses of funds, 6 months to 31 March 2023 $940bn $940bn ($bn) Short Term Liquid Assets3, Wholesale, 12% 12 Term Funding 24% 23 <12 Months, 2% 15 Other Short Other 2 5 1 Term Deposits5, 7% 2 12 Assets4, 3% 8 Customer Other Short 4 Wholesale Equity
Slide 101: Liquidity
Liquidity Liquidity coverage ratio (quarterly average) Net stable funding ratio composition (bn) Group NSFR 117% as at 31 Mar 23 122% LCR1 128% LCR1 131% LCR1 130% LCR $631bn $541bn 163 173 200 Wholesale 200 Liquids and Funding & Other Other Assets 28 25 14 2 Non-Financial Other Loans Corporate Reta
Slide 102: Treatment of marketable securities and cash
Treatment of marketable securities and cash 1 $222bn • NAB’s marketable securities and cash of $222bn are largely regulatory compliant HQLA with small holdings 11% Other Marketable Fair value – either for customer activities Securities through Profit and Loss or through Other • Over half of the regu
Slide 103: Term wholesale funding profile
Term wholesale funding profile Historical term funding issuance1 ($bn) 5.2 5.7 6.7 8.1 5.0 4.7 yrs yrs yrs yrs yrs yrs 39 33 1 28 26 29 3 23 29 1 14 18 23 21 16 13 10 5 5 9 6 2 2 FY18 FY19 FY20 FY21 FY22 1H23 Tenor2 Secured Senior Unsecured and Subordinated Debt RBA Term Funding Facility RBNZ Fundin
Slide 104: Diversified & flexible term wholesale funding portfolio
Diversified & flexible term wholesale funding portfolio 1H23 issuance by product type1 1H23 issuance by currency1 AUD 28% Senior 61% Other 5% Covered 25% EUR 11% USD 53% Subordinated NZD 3% 14% Outstanding issuance by product type1, 2 Outstanding issuance by currency1 AUD 27% RMBS 2% Senior 63% USD
Slide 105: Funding costs
Funding costs Indicative term wholesale funding issuance costs1 Average term wholesale funding costs2 (bps) 400 130 300 125 120 200 115 100 110 0 Mar 20 Sep 20 Mar 21 Sep 21 Mar 22 Sep 22 Mar 23 Sep 19 Mar 20 Sep 20 Mar 21 Sep 21 Mar 22 Sep 22 Mar 23 3 yr senior 5 yr senior 10 yr senior 10NC5 Tier 2
Slide 106: Additional information: Sustainability
Additional information Sustainability
Slide 107: Sustainability is embedded in our Group Strategy
Sustainability is embedded in our Group Strategy Commercial responses to Resilient and sustainable Innovating for the future society’s biggest challenges business practices Our priorities • Climate action • Colleagues and culture • Our future core business and market- leading data analytics • Afford
Slide 108: Progress against our climate strategy
Progress against our climate strategy Supporting customers to decarbonise and build resilience 1H23 sustainable financing activity Developing product offerings across divisions #1 Australian bank for global renewables transactions1 • Launched business finance for green equipment3 raised for customer
Slide 109: Progress against our climate strategy
Progress against our climate strategy Supporting customers with their transition plans • Completed transition maturity assessments for 100 of our largest greenhouse gas (GHG) emitting customers, ahead of Transition maturity assessment completed for target date of September 2023 100 customers • The a
Slide 110: Energy generation exposures
Energy generation exposures Energy generation EAD by fuel source1 (AUD$bn) • From 1 January 2023, the revised capital framework4 has Pre revised capital framework2,3 Post come into effect 8.69 • The primary impact of this change on NAB’s energy generation exposures is a reduction in EAD due to chang
Slide 111: Resources exposures
Resources exposures Resources EAD by type1,2,3 (AUD$bn) Post Pre revised capital framework4 • From 1 January 2023, the revised capital framework5 10.03 has come into effect 9.16 9.11 0.57 • The primary impact of this change on NAB’s resources 0.36 8.59 exposures is a reduction in EAD due to changes
Slide 112: Resources exposure by type
Resources exposure by type1 Thermal coal mining (AUD$bn) exposure2,3 Oil & Gas Extraction - lending only (USD$bn) exposure5 0.65 0.52 0.46 0.42 0.37 36% 1.53 1.43 20% 21% 23% 28% 0.99 1.02 Mar 21 Sep 21 Mar 22 Sep 22 Mar 23 Sep 21 Mar 22 Sep 22 Mar 23 Thermal coal EAD % Thermal coal rehabilitation p
Slide 113: Nature-related risks and opportunities
Nature-related risks and opportunities Approach to integrating nature-related risks and opportunities in our business Focusing on Integrating within risk Reporting and customers management engaging • Prioritising action in agribusiness. • Part of ‘Sustainability risk’ , which is • Taskforce on Natur
Slide 114: Nature-related risks and opportunities
Nature-related risks and opportunities Research to drive customer and business outcomes Planned Project Focus Partner Intended outcomes completion Integrated Farm To model the dynamic relationship between Australian Enhanced decision-making (by customers Dec 2024 Modelling to agro-ecosystems, manage
Slide 115: Nature-related risks and opportunities
Nature-related risks and opportunities Nature-related risk in decision-making1 Illustrative example of consideration of water-related risk during the credit risk and due diligence process for an agribusiness loan between $15m - $50m • Consideration of water-related risk (e.g. presence of water right
Slide 116: Our responses to society's biggest challenges
Our responses to society’s biggest challenges Supporting Indigenous Australians Affordable and specialist housing • Announced new target to lend at least a further $6bn by • Published Reconciliation Australia 2029 to help more Australians access affordable and endorsed interim Reconciliation special
Slide 117: Additional information: Economic data
Additional information Economic data
Slide 118: Australia and NZ key economic indicators
Australia and NZ key economic indicators Australian economic indicators (%)1 NZ Economic indicators (%)1 CY20 CY21 CY22 CY23(f) CY24(f) CY20 CY21 CY22 CY23(f) CY24(f) GDP growth2 -0.1 4.6 2.7 0.7 1.3 GDP growth2 1.0 3.3 2.2 -0.6 1.5 Unemployment3 6.8 4.7 3.5 4.0 4.7 Unemployment3 4.9 3.2 3.4 4.0 5.4
Slide 119: GDP
GDP GDP is now 7.2% above pre-COVID-19, but growth is Growth in GDP and components2 slowing (Index December quarter 2019 = 100) (%) Forecasts 15 Quarterly 115 110 Year-ended 9 105 100 3 95 90 -3 85 80 GDP 75 70 2010 2012 2014 2016 2018 2020 2022 2024 Goods and services spending are normalising3 The
Slide 120: Housing market has softened but vacancies are low
Housing market has softened but vacancies are low House prices have stabilised1 New rents growth is strong across the states2 (Index) Sydney Melbourne Brisbane (%) 160 Sydney Melbourne Brisbane Adelaide Perth Hobart 15 150 Adelaide Perth Hobart 140 10 130 5 120 0 110 -5 100 90 -10 2019 2020 2021 202
Slide 121: The business sector has remained resilient
The business sector has remained resilient Conditions are high but confidence is soft1 Capacity utilisation is high1 (Net Bal.) (%) 20 85 0 -20 80 -40 Business Confidence Business Conditions 75 -60 -80 70 2007 2010 2013 2016 2019 2022 2006 2009 2012 2015 2018 2021 Investment Intentions remain solid2
Slide 122: Monetary Policy is tightening and inflation is high
Monetary Policy is tightening and inflation is high The cash rate is near the peak1 Headline inflation has peaked but remains high2 (%) (%) Forecasts 7.0 Cash Rate Target Quarterly Year-ended 6.0 6 6 5.0 4 4 4.0 2 2 3.0 0 0 2.0 1.0 -2 -2 0.0 -4 2007 -4 2010 2013 2016 2019 2022 2007 2009 2011 2013 20
Slide 123: New Zealand economy
New Zealand economy Economy contracted in Q4 2022, unemployment rate Commodity export prices have fallen back, including dairy3 remains at very low level1 (Index, January 2019 = 100) (GDP, $NZbn, chain prices) (Unemployment rate, %) 180 75 6 160 70 5 140 65 120 4 60 100 Total index Dairy 80 55 3 201
Slide 124: New Zealand housing
New Zealand housing House prices falling 1 Sales volumes also down 2 (Index) (‘000s) 4,500 12 4,000 10 8 3,500 Auckland 6 3,000 National ex Auckland 4 2,500 2 2,000 0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 New residential mortgage lending has moved to a lower Dwelling approvals (consents)
Slide 125: Abbreviations and disclaimers
Abbreviations and disclaimers
Slide 126: Abbreviations
Abbreviations ALA Alternative Liquid Assets KYC Know Your Customer AML Anti Money Laundering LCR Liquidity Coverage Ratio APLMA Asia Pacific Loan Market Association LGD Loss given default CET1 Common Equity Tier 1 Capital LMA Loan Market Association CIC Credit impairment charge LSTA Loan Syndication
Slide 127: Source and notes
Source and notes Slide 12 (1) DBM Business and Consumer Atlas (part of RFI Global), measured on 6 month rolling average to Mar 23. A number of changes have been made to our Strategic NPS measure to align more closely to the Group Strategy. Consumer NPS now excludes consumers with Personal income of
Slide 128: Disclaimer
Disclaimer The material in this presentation is general background information about the NAB Group current at the date of the presentation on 04 May 2023. 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 con
National Australia Bank — H1 2023 Earnings Presentation on 6ix