NAB provisioning for increased mortgage risks

author-avatar By
on May 06, 2021
NAB provisioning for increased mortgage risks

In its latest half-year earnings report, National Australia Bank flagged an increase in provisions off the back of mortgage risks.

Compared to March 2020, NAB's March 2021 half-year results showed an increase in collective provisions by 18.4% to $808 million.

According to NAB's report, net collective provisions consisted of $588 million "raised for targeted sectors impacted by COVID-19 including aviation, tourism, hospitality, entertainment, retail trade, commercial property and higher risk mortgages."

However, provisions are down compared to September 2020's half-year report, with the big four bank seeing improvements in mortgage and lending delinquencies. 

On Tuesday, APRA deputy chair John Lonsdale said there was no evidence of a decline in lending standards.

In the quarter to December 2020, the prudential regulator reported that "LVRs greater than or equal to 80% increas[ed] to 42% in the December 2020 quarter from 39.9%, likely reflective of an increase in first-home buyer activity".

The same report also showed loans with debt-to-income ratios above 6-times increased 0.9 percentage points to 17.2% over the same period.

NAB chief executive Ross McEwen said a part of the economic recovery lies in the success of the vaccine rollout.

"The recovery is not even, and some customers such as those in international travel and hospitality, particularly in CBD areas, still face significant challenges," he said.

"Longer term outcomes for these customers depend on a number of factors expected to become clearer in coming months. These include the impact of JobKeeper ending, timing of the vaccine rollout, and the reopening of international borders." 

Moody's Investors Service vice president Frank Mirenzi said NAB's overall results were a positive.

"Australia’s strong economic recovery, which is building momentum for loan growth, underlines a more positive outlook for revenue growth in the second half," he said.

"A very strong capital position, along with large loan loss reserves, reflects the strength of the balance sheet even as the risk of bad loans begins to recede.”

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS
NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 27, 2022. View disclaimer.

Term deposits lose steam

Total customer deposits also increased 1.6% since September 2020 to $475.8 million, and NAB says this was largely due to "government and central bank stimulus measures in response to COVID-19". 

"On demand deposits" or savings accounts increased by $4.6 billion compared to September, offset by term deposits falling by $3.2 billion.

Approximately $500 million extra worth of customer deposits earned no interest compared to September 2020.

Below you can compare a range of big four bank term deposits.

Lender

Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]500031$product[$field["value"]]$product[$field["value"]]More details

Term Deposit ($5000-$499999) - 60 months

    At Maturity, Annually$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]5000031$product[$field["value"]]$product[$field["value"]]More details

    Term Deposits ($50k - $200k) - 60 months

      Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]500031$product[$field["value"]]$product[$field["value"]]More details

      Advance Notice Term Deposit - 10 month

        Annually, At Maturity$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]500031$product[$field["value"]]$product[$field["value"]]More details

        Term Deposit ($5000-$250000) - 24 months

          Rates based on a $50,000 deposit. Table includes term deposit products from the big four banks with the highest rates, regardless of term. Rates correct as of June 27, 2022. View disclaimer.


          Photo by CDC on Unsplash

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          author-avatar
          Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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