Mortgage off-set accounts double at NAB but profits disappoint in third-quarter update

The number of NAB mortgages with off-set accounts has almost doubled in the last two years, the bank has revealed as it reported a strong performance from its personal banking division, but an overall disappointing profit result in its third-quarter update.

NAB reported profit in the three months to June 30 of $1.4 billion, unchanged from what it reported for the same period a year ago and below analysts’ expectations of $1.5 billion.

NAB currently also has the lowest standard variable mortgage rate of its big four rivals and has pledged to keep it the lowest over 2012.

Money held in an off-set account is deducted from the principal owed, allowing borrowers to reduce their interest payments and the length of their loan repayment period.

Property Observer reported last week that in the 17 months since it kicked off its “break-up” campaign on Valentine’s Day last year, NAB had steamed ahead of its big four rivals in providing home loans for owner-occupiers based on the APRA figures.

Fairfax Media banking writer Eric Johnston noted that NAB's growth in its mortgage book faster than its rivals had been  “helped by its strategy of discounting loans”, with expansion of its mortgage book is currently running at 1.3 times growth in the broader market.

While the overall profit result was disappointing, personal banking, which includes mortgage lending, produced a strong result, “benefiting from good growth in revenue and seasonally lower charges for bad and doubtful debts (B&DDs)".

NAB delivered a stable result for the quarter and made further ground against its strategic agenda to strengthen the Australian franchise, which has been the Group’s unwavering focus since 2009”, National Australia Bank Group chief executive Cameron Clyne said today.

“This quarter’s result is set against a backdrop of ongoing challenges in the global economy with continued uncertainty in the Euro-zone and the United States, volatility in global financial markets, and slowing growth in the big emerging economies. Although subdued business and consumer confidence continue to affect the Australian economy, we remain positive about the outlook," Clyne said.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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