Full Year 2024 National Australia Bank Ltd Earnings Presentation Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Triggs - JPMorgan - Analyst : First question, please, just around the margin outlook. Deposit costs and mix looked to be about a four basis point headwind to NIM in the second half if you stripped out the replicating portfolio benefit. Could you give us a little bit more detail on the split of that between negative mix shifts and price impacts? And on those 2 points, how do you see the outlook for deposit price into the next half and also mix noting that the mix shift did appear to pick up again in the second half?

Question: Andrew Triggs - JPMorgan - Analyst : Nathan, do you still see termed deposit pressures because it would appear that things have improved a little bit there from a competitive intensity standpoint?

Question: Andrew Triggs - JPMorgan - Analyst : And the second question just around credit quality, particularly maybe just to separate out between retail and SME banking. But are you seeing a moderation in arrears deterioration later in the half in home loans? And on SME banking, how long do you expect credit quality to continue to derate at the current pace?

Question: Richard Wiles - Morgan Stanley - Analyst : I've got a couple of questions. One is on Business Banking margins and the other is just on some of the trends in your deposit mix. So on Business Banking, can you give us a bit more detail on what's driving the five basis point decline in the Business Bank margin? Has much changed from the previous half? And have you seen an increase in competition for business lines? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 11:30PM, NAB.AX - Full Year 2024 National Australia Bank Ltd Earnings Presentation

Question: Richard Wiles - Morgan Stanley - Analyst : Okay. And just my question on deposits. It relates to slide 83. Can you provide a bit more detail on the mix of the savings accounts in the Retail Bank and the Business Bank. In the retail bank, you got $45 billion of savings. In Business, you got $69 billion. Can you give us an idea of sort of what proportion of those savings balances are in high rate accounts like your reward saver in the Retail Bank?

Question: Richard Wiles - Morgan Stanley - Analyst : And Nathan, is that relevant for the Business Bank as well as well as Retail Bank?

Question: Jonathan Mott - Barrenjoey - Analyst : Can I ask a follow-on question about the Business and Private Bank. In Business Lending, in particular, you called out that you're the clear market leader. You had solid growth of about 4% in the lending book in the half, 8% year-on-year. But as you called out as well, a lot of the competitors are targeting this space. So of the banks that have reported so far, if we look at CBA business bank, they've seen 11% growth year-on-year. Westpac commercial up 10% (inaudible) up 20%. Even Macquarie BFS business, 14%. So I know they're not exactly directly comparable and how they slightly different, but they all tend to be growing a little bit faster. So is there something we should be concerned about? Because you are calling out the business credit growth will slow from current levels back to around 5%. And your competitors are really, if anything, taking a little bit of piece away from you at the moment. Any thoughts around that?

Question: Jonathan Mott - Barrenjoey - Analyst : Great. And just a second question probably to Nathan on asset quality. You did call out SME and you gave a bit of detail around where the deterioration is coming. You saw a bit of a jump up in the arrears levels in the June quarter, then another step-up in September. Can you give us a little bit more detail on that? I think you said supply chain issues in the manufacturing sector. Any color around that, that you could give us on the single name exposures and what we should be looking out for?

Question: Victor German - Macquarie Research - Analyst : I was hoping to maybe first ask a comment -- ask a question on the Retail Bank. And Andrew, your comments about retail banking and aspiration of improving proprietary channel and deposit franchise makes a lot of sense. But if we look at sort of more recent months, you have lost share in mortgages. What do you think is driving this? And how long will it take to address? Do you think it's just a matter of price? Are you looking to make improvement in your retention or originations as well?

Question: Victor German - Macquarie Research - Analyst : That makes a lot of sense. And maybe the second question on kind of sort of related on our favorite topic of investment spend, noting that you increased your investment spend to $1.8 billion, which sounds like you believe is more comparable to peers. Maybe, Andrew, just sort of following up from your previous response, given the strategy you outlined around the service proposition and focus on deposits as well, why do you think this is enough when your competitors are spending more, and particularly CBA? It sounds like they're spending over $2 billion. And also maybe a question also for Nathan. I mean, why does the capitalization piece remains so large? And when do you think capitalized balances will peak? When do they peak? And I guess, what's the duration of that capitalization as well?

Question: John Storey - UBS - Analyst : Andrew, I wanted to ask you just about the distribution in Business Banking and certainly a view out there potentially that commercial brokers could get a lot bigger in terms of new business. Just wanted to get your thoughts on how you see potentially the economics around this playing out? And then maybe just tied to that, how much business does NAB originate from commercial brokers? And how has that changed in your period at the bank?

Question: John Storey - UBS - Analyst : And Andrew, just on how it's changed during your four years at the bank?

Question: Matthew Dunger - BofA Global Research - Analyst : If I could just ask about the Net Promoter Score, you've noted this has fallen short of the target and the relative positioning in consumer and business on slide 12 appears to have weakened. Just wondering if you could unpack why you think that's happened? And with your priorities for FY25 to improve this, what's going to drive the improvement?

Question: Matthew Dunger - BofA Global Research - Analyst : And if I could just ask a follow-up on capital management. Sitting at a 12.2% pro forma CET1 ratio remaining well above the target, just wondering what would give you confidence to extend the buyback after this period in six months' time?

Question: Ed Henning - CLSA - Analyst : If you just go to slide 51 and you look at the SME market share that's been falling, I just want to double check, has that all been the rebalance in agri and what you're saying now going forward is you want to maintain market share? And if you look at the other divisions on the corporate side, you're talking about disciplined growth in mortgages, you're talking about managing the portfolio for returns. As you go -- as you go forward on this, I'm just thinking about, can you -- are you happy to continue to lose market share at least in two of your divisions over the long term and just really focus on returns is the first question, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 11:30PM, NAB.AX - Full Year 2024 National Australia Bank Ltd Earnings Presentation

Question: Ed Henning - CLSA - Analyst : Okay. And just a second question, just around the Citi acquisition. Can you just talk about how that integration has been going? Have you been seeing runoff in the book? And do you see more -- or if you have seen runoff, do you anticipate more runoff kind of going forward on that book?

Question: Brendan Sproules - Citi - Analyst : Brendan from Citi. I have a couple of questions. Firstly, on the Business Bank. You just talked about the pipeline, particularly being quite full in terms of potential new transactions, but you've also flagged that you think that business credit will slow to sort of 5%. And I think six months ago, you sort of flagged a similar type slowdown with the economy. Where do you think you'll see this slowdown emerging? And what are you seeing across your franchise that, that sort of expects this slowdown to occur in Business Lending?

Question: Brendan Sproules - Citi - Analyst : Fantastic. That's quite helpful. And my second question is just on the Corporate & Institutional Bank, which is obviously your second largest division. I mean over many years, this has been a division of benefiting from rising rates and a shrinking of risk-weighted assets and capital intensity. When you look forward, you've described an ambition of disciplined growth. Could you talk around the growth opportunities in this business and/or the improvements in returns that you can expect from here?

Question: Brendan Sproules - Citi - Analyst : And does that mean all there's opportunities you just sort of outlaid there, which is obviously across quite a number of different SKUs of business is actually going to drive quite a bit of profit growth in this division in '25?

Question: Brian Johnson - Jefferies - Analyst : I had two, if I may. The first one is that when we have a look on slide 72, and it's always quite staggering to me, but we can actually see NAB as a really great bank seems to be incredibly reliant on the broker channel. But I'm just wondering, with the significant reduction in the regulatory capital intensity, we've seen one of the earlier slides, you can see that the front book margins seem to be kind of moderating. But that was as at August. And I would point out that it would appear that one of your peers started to discount (inaudible) again. Could we just get a feel on the economics of the -- is Home Lending right now at the market rate through the broker channel, once you take into account all the costs, is it once again below the cost of capital?

Question: Brian Johnson - Jefferies - Analyst : Can I just go back to the actual question though, Andrew? Andrew, right now, we've had a significant reduction in the regulatory capital intensity across many of the banks. Can I just check, previously, you'd said through the broker channel, it was below the cost of capital. The chart we've got is as at the end of August. But I'm just interested, has it gotten worse literally over the last six weeks to the point where through the broker channel, it's below the cost of capital again? Or just the capital relief make it all better?

Question: Brian Johnson - Jefferies - Analyst : That discipline is the correct answer too. And just a second one. In the slides, you talk about some of the investment going to basically fix up some of the aging infrastructure. Could we get a feel on the long-term IT strategy? We've got Westpac doing project we've got CommBank that did it a long time ago. What is your thinking on the need to kind of like totally reengineer the platforms within NAB?