MARKETS SPECTATOR: Minor impairments

National Australia Bank is unfazed by the depressed mining sector, saying that impaired loans are just a fraction of its overall mining exposure.

National Australia Bank’s business loan book is not deteriorating. That is what Joseph Healy, who is in charge of business banking for the company, told a UBS conference today.

The bank’s exposure at default – the total value the bank is exposed to if companies default on their loans – to the depressed mining sector was $9.2 billion as of March. Impaired assets as of March made up less than 1 per cent of NAB’s total exposure at default to the mining sector.

NAB’s exposure to the mining services sector was 30 per cent of its total mining sector lending exposure in March. Exposure to oil and gas explorers and producers made up 26 per cent, exposure to gold companies was 5 per cent while exposure to the miners was 30 per cent in March.

NAB had $20.3 billion exposure at default in Australian agriculture as of March. The bank perceives “some signs of stress, particularly in Northern Territory cattle and Victorian dairy”. The bank says 80 per cent of its Australian agriculture portfolio is fully secured, 19 per cent is partially secured and 1 per cent is not secured. 

The bank says 47 per cent of its business banking loan book as of March were to companies it classifies as investment grade, unchanged from September last year. Investment grade loans to small and medium-sized businesses comprised 41 per cent of the total loan book to that sector, according to NAB.

At 1217 AEST NAB shares were down 1 cent, or 0.03 per cent, to $29.73. The stock is up 30 per cent in the last 12 months.

The benchmark S&P/ASX200 Index had gained 20.850, or 0.4 per cent, to 4835.20. The index has added 17 per cent in the last year.

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