NAB sees 20pct decline in house prices

National Australia Bank's chief executive says the bank sees house prices declining as much as 20 per cent peak-to-trough, but says most of its customers will be able to manage repayments even if rates rise higher than expected.

"We know there will be some who face difficulties," CEO Ross McEwan said as the bank reported its full-year earnings results on Wednesday. 

"We see the most-at risk customers as those who borrowed over the last few years when interest rates were very low, and serviceability was tested at less than six per cent."

That amounts to $177 billion in lending, originated from August 2019 to July 2022, when rates were extremely low and the customers' serviceability was tested at an average of less than six per cent. 

Overall NAB sees just $9.7b of its $329b total home loan portfolio at risk if the cash rate is hiked to 3.6 per cent, as its economists are predicting. Those customers have a repayment buffer of less than 12 months, a dynamic loan-to-value ratio of under 80 per cent and no private or government mortgage insurance.

Just $1b in loans are at the most risk - those customers have repayment buffers of less than three months, a dynamic loan-to-value ratio of more than 90 per cent and also no mortgage insurance.

That scenario doesn't change much even if the cash rate peaks higher than its economists are expecting.

"So we've re-run these numbers at four per cent, and it doesn't make much of a difference," Mr McEwan told analysts.

"There's a modest up-tick in at-risk customers, but there's no massive cliffs or exponential increase in the at-risk customer cohort."

Australia's largest business-focused bank reported cash earnings of $7.1 billion for 2021/22, up 8.3 per cent from the previous year. 

NAB's bottom line net profit also rose 8.3 per cent, to $6.9 billion, in the year ending September 30.

"Our FY22 results are pleasing," Mr McEwan said .

The result was attributed to volume growth and cost management, and interest rates.

"After 11 years of interest rate reductions, earnings have also benefited in FY22 from the rising interest rate environment," Mr McEwan added.

Borrowing rates have been rising steadily since May when the central bank first began hiking the cash interest rate from a historical low of 0.1 per cent.

Mr McEwan pointed to the current economic uncertainty, noting households are likely to be challenged by further rate rises and soaring inflation.

"However, strong employment conditions along with substantial household and business savings give us confidence in the resilience of our customers and the broader economy," he added.

NAB will pay a final dividend of 78 cents, taking the payout for the year to $1.51 a share, up 18.9 per cent from a year ago.