National Australia Bank has announced a 19% increase in first-quarter cash earnings, aided by rising interest rates. However, the lender warned of headwinds as property prices decline and borrowers are pushed by growing living expenses.
In an environment of high interest rates, it is anticipated that Australian banks would produce robust earnings, but the lenders’ run is projected to wane later this year as a cooling economy will result in slower loan growth and more bad debt.
“The higher interest rate environment, resulting from central bank actions to curb inflation, has benefited our revenue this period,” NAB Chief Executive Officer Ross McEwan said.
“However, this is also slowing economic growth and lowering home prices, while increasing loan repayments. We are aware that these shifting conditions, coupled with rising costs of living, will cause challenges for some of our consumers “he added.
After eight rate hikes through 2022 and an additional 25-basis-point increase last week, the central bank has signaled that it would continue to tighten monetary policy to combat inflation. Growing interest rates have cooled the property market and contributed to the rising cost of living.