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NAB posts huge profit after mortgage rate hike

Business

National Australia Bank has announced a huge annual profit of 9.7 per cent to $6.34 billion following its decision to lift interest rates on mortgages.

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The lender announced on Wednesday cash earnings had increased 15.5 per cent to $5.84 billion.

NAB stated net profit for the 12 months to August 31 was up 19.7 per cent on last year’s $5.3 billion, with cash earnings increasing 15.5 per cent to $5.84 billion.

Confirmation of the huge profit follows the recent decisions by all four lenders to lift interest rates on mortgages to help cover the cost of new capital requirements.

But it was lower than anticipated by many analysts, who expected a net profit in excess of $7 billion.

“I’ve got it down as a pretty big miss,” optionsXpress analyst Ben Le Brun told Sky.

NAB confirmed it had agreed to sell 80 per cent of its underperforming life insurance business for $2.4 billion to Japan’s Nippon Life, retaining the remainder.

“Our wealth business has delivered significantly improved results since 2013, which has enabled us to secure the long term partnership we are announcing today,” chief executive Andrew Thorburn said.

“This partnership will enable us to continue to deliver insurance solutions to our customers while improving wealth returns for shareholders.”

Le Brun said it was a good deal for NAB and its shareholders.

“In terms of the price tag, I think the market will be quite comfortable with that, even quite pleased,” he said.

NAB also announced the long-awaited timetable for the demerger and initial public offering of its troubled UK subsidiary Clydesdale in February, which has been a drag on performance for years.

“We will have exited all our low returning offshore businesses, allowing us to fully focus on serving our priority customer segments and leveraging the investments we have made in Australia and New Zealand,” Thorburn said.

– AAP

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