ASX-listed National Australia Bank Limited’s (AU:NAB) shares gained 1.5% in today’s trading session, even as the bank reported an 8% year-over-year decline in Q3 cash profits, totaling AU$1.75 billion. However, NAB’s net interest margin (NIM) remained stable, providing some relief to investors. The bank’s NIM faced minor declines from the lending competition and an unfavourable deposit mix, but these were offset by the benefits of a higher interest rate environment.
NAB is among the top four largest banks in Australia, serving a vast customer base.
NAB’s Q3 Profits Hit by Impairment Costs
The profits were mainly hit by credit impairment charges of AU$118 million due to higher mortgage arrears. This was above the AU$363 million impairment charges books in the first half of 2024.
Additionally, the bank warned of a decline in its Business Banking portfolio, noting that its non-performing loans have reached their highest level in at least two years.
More from NAB’s Q3 Update
In the third quarter, NAB saw a 1% decrease in revenue, mainly due to underperformance in the Markets & Treasury (M&T) division. However, this decline was somewhat mitigated by volume growth and increased other operating income. Meanwhile, the bank’s expenses during the quarter grew by 1%, largely due to increased salary costs, partially offset by gains in productivity.
Among its divisions, the bank reported a 1% increase in lending balances for the third quarter, driven by a 3% rise in Australian SME (small and medium enterprise) business lending. Moving forward, the bank is focusing on expanding this SME segment.
Are NAB Shares a Buy?
Following the results, Goldman Sachs reiterated its Buy rating on the NAB stock. On the other hand, Citi analyst Brendan Sproules confirmed his Sell rating, predicting a downside of 27.4%.
Overall, NAB stock has received a Hold rating on TipRanks, based on five recommendations from analysts. The NAB share price forecast is AU$31.89, which is 12.6% lower than current trading levels.
