Highlights

  • Jefferies assigns NAB a Buy rating with a target price of AUD 46.75.
  • NAB maintains CET1 capital above regulatory requirements with a pro forma ratio of 11.81%.
  • NAB’s outlook factors in improving Australian growth and gradual recovery in New Zealand.

National Australia Bank Limited (ASX:NAB) shares closed at AUD 42.43 on 22 January, recording a 3.04% intraday gain. The move might follow Jefferies issuing a Buy rating on the banking stock, with a target price of AUD 46.75. The target implies potential upside from the latest closing price. Market participants are now turning attention to the upcoming Q1 FY26 trading update, which is expected to provide further clarity on lending growth, margins, and operating conditions across NAB’s core markets.

NAB currently offers a dividend yield of approximately 4.01%, placing the stock in focus ahead of its first-quarter FY26 trading update scheduled for 18 February 2026.

FY25 Performance Shows Growth in Lending and Deposits

In FY25, NAB reported a 2.9% increase in revenue compared with FY24, supported by loan growth and higher Markets & Treasury income. Gross loans and advances increased by 5.9%, while deposits rose by 7.4% over the period. Net interest margin expanded by 3 basis points to 1.74%, although excluding impacts from Markets & Treasury income and liquid assets, margin edged lower by 1 basis point due to higher funding and deposit costs.

Underlying profit increased by 1.3% over FY25, assisted by volume growth and higher Markets & Treasury income. Operating expenses rose 4.6%, reflecting higher personnel and technology costs, along with AUD 130 million related to payroll review and remediation activities.

Capital and Liquidity Position

As at 30 September 2025, NAB reported a Group CET1 capital ratio of 11.70%, down 65 basis points from the prior year. The movement was driven by lending growth, ongoing investment in the business, and the impact of a AUD 0.6 billion share buyback. On a pro forma basis, the CET1 ratio stood at 11.81%, reflecting the sale of NAB’s remaining stake in MLC Life. The bank also reported a liquidity coverage ratio of 135% and a net stable funding ratio of 116%.

Economic Conditions in Australia and New Zealand

In November, NAB outlined improving economic conditions in Australia, supported by rising household consumption, easing inflation pressures, and reductions in the RBA cash rate. Real GDP growth in Australia is forecast to rise to 2.0% in 2025 and 2.3% in 2026. In New Zealand, economic conditions remain more subdued, though rate cuts and commodity prices are expected to support a recovery in 2026.