NAB reports tick up in borrower repayments
National Australia Bank reported that 16 per cent of its borrowers on a mortgage deferral plan have now begun repayments.
On Friday, the bank reported its third quarter trading update.
Currently, the bank has 86,000 home loans and 38,000 business loans totalling $55 billion.
NAB CEO Ross McEwan said it was pleasing that there is a shift towards the repayment of mortgage loans that have begun via the bank’s check-ins.
To date, the bank has made 24,000 calls starting with customers from high-risk industries.
However, he warned that extending credit may not be an option for some borrowers.
“Many customers still face an uncertain future. Where it makes sense, we will offer them extra support to help them manage through the pandemic,” McEwan said.
“But providing further credit wont always be the right thing to do.”
Speaking at a media briefing, McEwan said that the bank has put “more of our colleagues on to the front line”.
“We are currently recruiting for somewhere between 300 and 500 to go into a NAB Assist to actually make more calls and help customers get them through the situation.
Let me be quite clear. We’ll work with each individual customer on what’s the best thing for them and their loan to get them through this
“Our business bankers are all day, every day, talking to customers about how we can be helpful.”
His comments come at a time when both ASIC and APRA provided guidance on how lenders should manage the transition from deferrals to repayments.
ASIC said it expects lenders to ensure their customers do remain in their homes.
“We will take every reasonable step, to keep people in their homes and that’s what will certainly do,” McEwan said.
He acknowledged that “there will be some circumstances where people are better off selling-up early and taking some equity out of their homes, or keeping some equity, before it disappears and that’s what will work with every individual customer on”.
NAB is currently working with its customers to assess a range of options, including extending loan deferrals; moving them to interest-only loans or restructuring their loans – options also considered by the Commonwealth Bank.
“Let me be quite clear. We’ll work with each individual customer on what’s the best thing for them and their loan to get them through this.”
As the bank with the largest business customers, NAB will continue to monitor closely affected industries, notably, tourism, education and retail.,
“If we get ourselves through this, 2022 as I said is probably a year where a lot of those industries are getting back to what is the new normal.”
By the numbers
Cash earnings for the bank fell 7 per cent due to credit impairment charges of $570 million. Cash earnings were at $1.6 billion.
Expenses rose 2 per cent in part due to remuneration costs including extra support needed to help customers manage the COVID-19 crisis.
Credit impairment charges fell 2 per cent to $570 million.
Loans that were 90 days past their due date rose 1.1 per cent or 9 basis points and this was primarily due to increased delinquencies in the Australian home loan portfolio where customers are not part of the deferral program.
Group CET1 ratio was 11.6 per cent compared with 10.4 per cent in March, due to the proceeds from institutional placement and a share purchase plan.
The first half also included a moderate increase in provisions with the bank booking in a $570 million credit impairment charge taking total credit impairment charges to $1.7 billion for the year.
Morningstar bank analyst Nathan Zaia said the result underpinned a sound quarter for the bank adding that while there was more detail on NAB’s loan deferral a clear picture will emerge post September when the government support eases.