UPDATE 1-Australia's NAB prepared to say 'no' to more debt for customers who cannot repay

(Adds analyst comment in 9th paragraph)

SYDNEY, June 15 (Reuters) - National Australia Bank (NAB) said some of the thousands of customers that have requested relief on loans due to the coronavirus pandemic would not be able to repay them, flagging it would not hesitate to deny any more lending.

Australian banks have since March provided holiday periods of up to six months to customers on over 772,000 business and home loans, worth over A$234 billion ($159.73 billion), industry statistics show.

“When deferral periods end around September, some customers may need additional support, some may need interest-only for a period of time, and some may be happy to go back to their normal principal and interest payment schedule,” NAB CEO Ross McEwan said in an op-ed in the Australian Financial Review on Monday.

The end for bank loan holidays coincides with the scheduled expiration of the government’s employee subsidy that has helped limit job cuts in sectors hit hard by the health crisis.

“With another three months of support measures still to go, it is too early to call how good or bad this will be,” the CEO of the country’s third-largest bank wrote. “We’re not waiting until then. We are talking to our customers now.”

McEwan said a number of customers who had deferred their loans were already returning to normal repayments as the country starts to reopen its economy, but others would be unlikely to remain solvent without further support.

“Sometimes saying no to customers is the right thing to do,” McEwan said. “We can’t put people into more debt if they can’t afford to pay it back.”

Australia’s household debt-to-income ratio is above 190%, among the highest in the developed world.

“Overburdening a customer with debt is clearly not in their best interests,” said Evans and Partners banking analyst Matthew Wilson. “Saying ‘no’ is sensible.”

On Monday, Australia’s Prime Minister said the country was coming through the virus better than most of its peers, and said it planned to continue to spend big on stimulus and infrastructure projects. ($1 = 1.4650 Australian dollars) (Reporting by Paulina Duran in Sydney; Editing by Himani Sarkar)