National Australia Bank shares have slumped after the bank warned of higher costs, and the Australian share market has ended little changed as investors await the latest consumer inflation data out of the US.
NAB said its unaudited cash profit rose 6 per cent over the third quarter from the same time a year ago, as it benefited from an increase in home and business loans, as well as higher interest rates.
The big bank said revenue increased by 2 per cent, but its net interest margin, or profit margin, was slightly lower overall because of a fall in income from its markets and treasury divisions.
But NAB flagged higher expenses for the second time in four months, including between $60 to $100 million to address regulatory concerns about suspected breaches of anti-money-laundering and counterterrorism financing laws.
NAB said a rise in income from higher interest rates was partly offset by home-loan competition and higher funding costs.
NAB and other big banks have passed on in full the Reserve Bank's 1.75 percentage point rise in interest rates since May to home loan borrowers.
The purchase of Citigroup's Australian consumer business also boosted earnings.
Chief executive Ross McEwan described the bank's quarterly performance as "pleasing".
"As the economy changes, continued low unemployment and healthy household and business balance sheets are helping mitigate the impacts of higher inflation and higher interest rates," he said.
"The majority of customers are well placed to manage these challenges, including approximately 70 per cent of customer home loan repayments ahead of schedule."
NAB shares fell more than 4 per cent in early trade, and closed down 2.9 per cent to $29.81.
REA profit
Real estate listings firm REA Group saw annual revenue for 2022 jump by 26 per cent to more than $1.1 billion as the housing market boomed last financial year thanks to record-low interest rates and government subsidies.
Net profit for the year rose by one-quarter to $408 million.
REA Group chief executive Owen Wilson said 2022 had been an "exceptional year", but he warned that property prices would continue to slow amid higher borrowing costs.
"The Australian property market is likely to continue to moderate as interest rates rise," he said.
"While this adjustment has already impacted property prices, the current market reflects strong fundamentals including record-low unemployment, high household savings and increasing migration, which should continue to support demand."
During the year, REA bought mortgage broker Mortgage Choice and REA India.
Investors get a full-year dividend of $1.64 a share, up 25 per cent.
REA Group shares rose 6.7 per cent, to $132.32.
News Corp reveals record profit
News Corporation said annual profit rose for 2022 boosted by its real estate business including REA Group, a lift in digital advertising revenue, record digital subscriber numbers, and recent acquisitions.
Revenue increased 11 per cent to $US10.4 billion ($14.89b), while net profit for 2022 nearly doubled to $US760 million, a record amount.
News Corp shares rose 5.9 per cent, to $25.70.
ASX edges higher
The Australian share market ended modestly higher after a day of cautious trade.
The All Ordinaries index rose nearly 0.3 per cent, to 7,279, while the ASX 200 index rose 0.1 per cent, to 7,030.
Big banks weighed on the market with NAB doing the worst.
Utilities and industrial stocks also fell.
Seven out of 11 sectors ended gained led by technology stocks, consumer staple, real estate and energy firms.
Lithium company Lake Resources (+15.4 per cent) was the best performer, followed by data centre operator Megaport (+10 per cent), and real estate firm Domain (+9 per cent).
The worst performers were biotech Imugene (-5.3 per cent), National Australia Bank (-2.9 per cent) and gold explorer De Gray Mining (-2.5 per cent).
The Australian dollar rose 1 per cent overnight.
At 4pm AEST, the local currency was buying around 69.74 US cents, down 0.2 per cent from today's open.
Spot gold was steady at $US1788.79 an ounce, and Brent crude oil rose 0.1 per cent, to $US96.78 a barrel.
Consumers hit by rate hikes
Consumer confidence fell for the ninth month in a row amid rising interest rates and rising living costs.
The Westpac-Melbourne Institute fell 3 per cent from July to August, on par with the lows seen during the COVID-19 pandemic and the global financial crisis.
The index is down by one-fifth compared to August last year, with pessimists outnumbering optimists.
The survey found the confidence of mortgage borrowers fell by nearly 9 per cent, and consumers expect more interest rate rises and home-price falls.
Westpac chief economist Bill Evans said confidence fell after last week's 0.5 percentage point interest rate rise by the Reserve Bank.
"Since the recent peak in November 2021, the index has fallen every month for a cumulative decrease of 22.9 per cent," he said.
Westpac expects the Reserve Bank to raise the official cash rate by another 0.5 percentage points to 2.35 per cent next month, and for rates to climb above 3 per cent early next year.
"We expect that the board will respond after September by adopting a steady 25-basis-points-per-month policy into the new year, with the last increase expected in February 2023," Mr Evans said.
Meanwhile, ANZ economists said household spending held up in early August, despite higher interest rates.
Furniture spending jumped by one-fifth over the year, and weekly spending at travel agents had doubled since February.
Spending fell on entertainment, accommodation and clothing in early August.
"We do not expect any immediate cliff in household spending due to interest rate rises, though will be watching the data for signs of weakness," economists Adelaide Timbrell and Madeline Dunk said.
"The very strong labour market is protecting against household income shocks, and RBA research suggests households are still adding to COVID savings buffers."
Business confidence up
While consumers are gloomy, business confidence rebounded in July thanks to higher sales and profits, despite rising interest rates and inflation.
National Australia Bank said business conditions climbed by 6 points in July, while confidence rebounded by 5 points.
Purchase costs increased to a record high of 5.4 per cent, while labour costs rose 4.6 per cent over the quarter.
NAB said the strength in conditions remained broad based across states and industries, with a notable pick up in the construction sector.
NAB chief economist Alan Oster said confidence bounced back in July, which was a surprise.
"Inflation and rising interest rates are clouding the outlook, and there growing concerns about the global economy, but businesses seem to have a fairly positive outlook at the moment," he said.
"For now, it appears firms are still finding that they can pass on higher costs to their customers, but it remains to be seen how long that can last before demand starts to deteriorate."
The Bureau of Statistics reported that business turnover rose in eight out of 13 industries in June.
The largest increases were in electricity, gas, water and waste services.
Wall Street
Wall Street had a mixed session after chip maker Nvidia warned of a fall in quarterly revenue as the US economy slows down.
US stocks retreated from their highs after official employment figures last week showed strong job creation, raising fears of more aggressive interest rate increases by the US Federal Reserve.
Investors are awaiting official US consumer inflation figures on Wednesday.
The Dow Jones Industrial Average rose 0.1 per cent to 32,833, the S&P 500 lost 0.12 per cent to 4,140, and the Nasdaq Composite fell 0.1 per cent to 12,644.
Chipmaker Nvidia lost 6.3 per cent after saying that second-quarter revenue would decline 19 per cent from the previous quarter because of weakness in its gaming business.
Electric car maker Tesla rose after its signed contracts worth $US5 billion ($7.16b) to buy battery materials from nickel-processing companies in Indonesia.
Shares of US car makers jumped after the US Senate passed a $US430 million bill to fight climate change that created a $US4,000 tax credit for used electric vehicles and provides billions in funding for their production.
Insurer American International Group reported a 26 per cent fall in quarterly profit on lower investment income.
It blamed market volatility for a delay in the public float of its life and retirement unit.
European stocks had a good session.
The FTSE 100 in London rose 0.6 per cent, to 7,482, the CAC 40 in Paris rose 0.8 per cent, to 6,524, while the DAX in Germany gained 0.8 per cent, to 13,688.
Oil prices rose thanks to positive economic data from China and the US.
Brent crude gained 1.8 per cent, to $US96.65 a barrel.
Spot gold also rose. It put on 0.8 per cent, to $US1788.50 an ounce.
ABC/Reuters
