Australia’s Big 4 Bank Stocks Tumble as NAB Warns of Higher Costs

By Ambar Warrick

Investing.com-- Australia’s four largest bank stocks tumbled on Tuesday after National Australia Bank Ltd (ASX:NAB), the second-largest of the group, warned of higher operating costs in the coming months.

NAB’s shares also fell the most among their peers, and were trading down 3.1% at 29.760 Australian dollars (A$).

Shares of Commonwealth Bank Of Australia (ASX:CBA), the biggest bank in the country, dropped 1.4%, while those of Australia and New Zealand Banking Group Ltd (ASX:ANZ) and Westpac Banking Corp (ASX:WBC) fell 0.8% and 1%, respectively. The broader ASX 200 index rose 0.1%.

While NAB reported a stronger quarterly cash profit, up 6% at A$1.8 billion, the bank forecast that costs would rise by 3% to 4% in 2022, higher than its previous guidance of 2% to 3%.

The bank cited provisions of up to $100 million for customer-related remediations as being the main reason behind the increase in costs. It also expects higher personnel and leave costs.

The bank logged a smaller net interest margin, citing increased competition in home lending and wholesale funding costs. The reading comes despite a sharp increase in Australian lending rates this year, in the face of rising inflation.

Traditional lenders like NAB and its peers are expected to benefit from higher lending rates. But the rate hikes also come at a time when the Australian housing market is under extreme pressure from a higher cost of living.

A survey by Westpac showed that consumer sentiment is at its lowest level in two years, amid rising interest rates and inflation. A bulk of this negative sentiment is also among mortgage holders, which in turn in weighed on the housing market.

Investors are now awaiting more cues on Australian lenders from Commonwealth Bank’s annual results, which are due on Wednesday.

The bank is expected to post a sharp drop in its annual profit due to one-off expenses, but is set to see an improvement in margins.