NAB’s share price belting adds to banking’s horror week as margins compress

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NAB’s share price belting adds to banking’s horror week as margins compress

NAB has added to banking’s horror week, with its shares recording their biggest loss in five years as investors took fright at another weak profit result.

Australia’s biggest business lender surrendered as much as 8.5 per cent on Wednesday, extending its value losses over the past week to $15 billion, after the lender revealed cash earnings had fallen 2 per cent to $1.7 billion in the first quarter.

The result reinforced investor concern that bank margins are declining under competition pressure, coming days after Westpac and Bendigo and Adelaide Bank also reported lower earnings.

Bank stocks had been running hot, with the big lenders recording strong gains since mid-2023.

However, NAB shares are off 11.4 per cent in the past five trading sessions, while Westpac has shed 7 per cent and Bendigo Bank 18.4 per cent. All up, the financials index has given up nearly 5 per cent since last week, weighing on the S&P-ASX200, which is 1.4 per cent lower.

NAB on Wednesday called out a “small decline in net interest margin” in the quarterly profit fall, blaming it on higher funding costs and competition in lending and deposits.

Revenue for the quarter was 3 per cent better, but that was offset by higher credit impairment charges and other expenses.

Citi analysts said the profit result was “thereabouts” market forecasts, but “we think the market will come away concerned by revenue growth . . . and underlying asset deterioration”.

NAB’s expenses rose 2 per cent on “higher personnel and financial crime-related costs, along with increased technology spend”.

Like its rivals, NAB is taking comfort in better economic conditions, despite elevated living costs that are still crimping household spending.

Tuesday’s interest rate cut is seen alleviating some of that pressure.

“The economic

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is improving, but cost of living and interest rate challenges persisted during the first quarter,” NAB chief executive Andrew Irvine said.

“While most customers are proving resilient, we have maintained prudent balance sheet settings to allow us to support customers while keeping our bank safe,” he said.

“We remain optimistic about the

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and are well-placed to manage our business for the long term and deliver sustainable growth and returns for shareholders.”

NAB shares finished $3.21 lower at $36.30.

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