National Australia Bank Ltd. aims to bring down absolute costs to less than A$7.7 billion over the next three to five years while focusing on growing its corporate lending segment, CEO Ross McEwan said, citing amid revenue headwinds and a low interest rate environment.

McEwan's comment comes after the bank reported a 36.6% decline in fiscal full-year cash earnings, in part due to higher provisions in the fiscal second-half.

"We are going to have a very, very competitive market with low-interest rates. That's not going to go away. We just need to be much, much better in this marketplace and how we operate. Our costs, as we've discussed, need to come down," the CEO said during the bank's Nov. 5 earnings call with analysts.

But he added that costs will likely rise further in the current fiscal year ending September 2021 before tapering.

"Regulatory and compliance spend will remain elevated in 2021 to improve and automate our control environments," McEwan said. The bank also had additional expenses in the second half of the fiscal year and it is spending more in its business bank and private bank businesses.

Nico de Lange, an analyst at S&P Global Ratings, added that the bank will likely target cost controls "through technology, streamlining operations, and rationalizing branch networks." DeLange said the bank's earnings were "sufficient to absorb elevated credit losses in the next two years."

"The result was in line with expectations at an underlying profit and pre-provision operating profit level," said Omkar Joshi, principal and portfolio manager at Opal Capital. "NAB achieved a much better outcome than peers on margins which was pleasing. Growth is a challenge for the entire sector currently but NAB's result does stand out amongst peers."

Joshi believes the bank will bring down costs through "productivity and savings on staff."

NAB's net interest margin fell 1 basis point to 1.77%. Australia and New Zealand Banking Group Ltd.'s net interest margin stood at 1.63% as of Sept. 30, down from 1.75%, while Westpac Banking Corp.'s net interest margin clocked in at 2.08% as of the end of September, down from 2.12%.

NAB is also shifting its focus on business and private banking. Gary Lennon, NAB's CFO, said the bank is looking to grow in lending to small and medium-sized enterprises. The bank has also seen growth in agricultural and rural lending, he added.

NAB had reported A$2.49 billion in cash earnings for business and private banking for the fiscal full year, down 11.6% from the prior-year period. The bank's other banking units also saw lower earnings during the fiscal year. Corporate and institutional banking earnings fell 2.6% to A$1.47 billion, while New Zealand banking fell 1.8% to A$1.47 billion. The bank's personal banking unit was the only unit to see an earnings increase to A$1.38 billion.

Lennon said the bank's business lending results were disappointing but the start into fiscal 2021 "has been pretty solid." The bank will also put more than 500 bankers into the segment. "Business and private bank is our key differentiator," McEwan said.