Key Highlights

  • National Australia Bank recorded FY26 statutory net profit of AUD 6.14 billion, declining 9.1%.
  • Cash Earnings decreased 13.4% to AUD 6.14 billion, reflecting notable expenses and higher Credit Impairment charges.
  • Net Operating Income increased 5.8% to AUD 22.01 billion, supported by lending growth and improved margins.
  • NAB maintained its fully franked annual Dividend at AUD 1.70 per share, with a CET1 ratio of 11.87%.

National Australia Bank Limited (ASX:NAB), one of Australia's four major banking institutions, reported higher Operating Revenue and improved net interest margins during FY26, although profitability was affected by rising credit impairment charges and significant accounting adjustments. The bank's financial results for the year ended 30 September 2026 highlighted a divergence between its underlying banking activities and statutory earnings, with revenue growth supported by lending volumes while credit provisions reflected a more challenging economic environment.

The results, released on 5 November 2026, showed statutory net profit after tax of AUD 6,143 million, representing a decline of 9.1% compared with FY25.

Cash earnings decreased by 13.4% to AUD 6,141 million, reflecting the effect of notable items and higher credit impairment expenses.

However, excluding large notable items, cash earnings remained broadly unchanged at AUD 7,090 million.

The bank also recorded growth in net interest income, improved its net interest Margin and increased its Common Equity Tier 1 Capital ratio during the year.

Meanwhile, management expects economic conditions to remain challenging during FY27, with a continued focus on credit risk management, operational efficiency and Business lending.

Understanding National Australia Bank's Business Operations

National Australia Bank provides banking and financial services to individuals, small and medium-sized businesses, large corporations and institutional customers.

The bank operates primarily across Australia and New Zealand through several business divisions.

Its Australian operations include Business and Private Banking, Personal Banking, and Corporate and Institutional Banking.

Bank of New Zealand provides banking services to personal and business customers in New Zealand.

NAB also operates Ubank, a digital banking business focused on savings and home lending products.

Business and Private Banking represents an important part of NAB's operating strategy, with services covering business loans, transaction accounts, deposits and other financial products.

Personal Banking provides residential mortgages, savings accounts, transaction accounts and consumer banking services.

Corporate and Institutional Banking serves larger businesses and institutional clients through lending, transaction banking, financial markets and risk management products.

The bank generates most of its revenue through net interest income, representing the difference between interest earned on loans and investments and the interest paid on deposits and other funding.

Additional revenue comes from fees, financial markets activities and other banking services.

Consequently, NAB's financial performance is influenced by lending volumes, deposit growth, net interest margins, credit quality and operating expenses.

FY26 Financial Performance Reflects Lower Reported Earnings

National Australia Bank reported statutory net profit after tax of AUD 6,143 million for FY26, compared with AUD 6,759 million in FY25.

This represented a reduction of approximately 9.1%.

Cash earnings declined by 13.4% to AUD 6,141 million, compared with AUD 7,091 million in the preceding financial year.

However, the reported cash earnings result included large notable items that affected the comparison between the two periods.

Excluding these items, cash earnings totalled AUD 7,090 million, broadly unchanged from FY25.

Large notable items amounted to AUD 1,347 million before tax and AUD 949 million after tax.

These expenses primarily reflected changes to NAB's software Capitalisation policy and associated accounting adjustments.

The revised policy changed how certain technology-related expenditure is recognised in the bank's financial statements.

Under the updated approach, some software development costs that would previously have been capitalised are instead recognised as expenses.

The adjustment reduced reported earnings, although part of the impact was non-cash in nature.

The company's Underlying Profit before credit impairment charges and tax, excluding large notable items, increased by 6.9% during FY26.

This improvement was supported by revenue growth exceeding the increase in underlying operating expenses.

However, higher credit impairment charges offset the improvement in underlying operating profitability.

The results therefore reflected continued growth in NAB's core banking activities alongside increasing credit risk and restructuring-related expenses.

Net Operating Income Increases 5.8% During FY26

NAB recorded net operating income of AUD 22,014 million during FY26, compared with AUD 20,813 million in FY25.

This represented growth of 5.8%.

The improvement reflected lending Volume growth, higher net interest income and changes in interest margins.

Net interest income increased by 6.4% to AUD 18,512 million, compared with AUD 17,396 million in the previous financial year.

Other operating income increased by approximately 2.5% to AUD 3,502 million from AUD 3,417 million.

The bank benefited from growth in lending and deposit balances across its operating divisions.

Gross loans and advances increased by 5.2% during FY26.

Deposit balances also increased by 5.2%, reflecting continued customer activity across business and personal banking.

Excluding the translation impact of the lower New Zealand dollar, gross loans and advances increased by approximately 6.5%, while deposits grew by 6.2%.

Higher Loan balances contributed to interest income, while deposit growth provided additional funding for the bank's lending activities.

However, the profitability of this growth depends on the pricing of loans and deposits, funding expenses and credit losses.

NAB continues focusing on business lending, deposit growth and direct home lending distribution as key elements of its operating strategy.

Net Interest Margin Improves to 1.80%

NAB's net interest margin increased by 6 basis points to 1.80% during FY26, compared with 1.74% in FY25.

Net interest margin measures the difference between interest income and interest expenses relative to the bank's average interest-earning assets.

A higher margin can support banking profitability when lending volumes and credit quality remain favourable.

The FY26 improvement reflected several contributing factors.

Markets and Treasury activities, together with a lower level of liquid assets, contributed approximately 3 basis points to the increase.

Excluding these effects, the underlying improvement in net interest margin was approximately 3 basis points.

NAB benefited from higher earnings on deposit and capital replicating portfolios, alongside a modest reduction in funding costs.

However, these benefits were partly offset by competition in lending markets.

Competition can affect banking margins when lenders offer lower rates or other incentives to attract Mortgage and business loan customers.

Deposit competition can also influence funding expenses as banks seek to retain customer balances.

NAB's ability to maintain its net interest margin will therefore depend on Interest Rate movements, funding costs, product pricing and changes in the composition of its lending portfolio.

Business and Private Banking Supports Earnings Growth

Business and Private Banking remained an important contributor to NAB's operating performance during FY26.

The division recorded approximately 10.7% growth in cash earnings excluding large notable items.

The improvement was supported by higher business lending volumes, customer activity and disciplined margin management.

Australian business lending balances increased by approximately 9.8% during FY26.

This growth reflected continued Demand from business customers and increased lending across selected sectors.

NAB also recorded growth in business transaction account balances, supporting its deposit funding position.

The bank's business lending activities cover small enterprises, medium-sized companies and larger commercial customers.

Products include Working Capital facilities, commercial property loans, equipment financing and other business lending arrangements.

These services provide NAB with exposure to business Investment and operating activity across Australia.

However, the division is also exposed to changes in business credit quality.

Higher interest rates, operating expenses and weaker economic conditions can affect borrowers' capacity to meet loan repayments.

Consequently, growth in business lending must be balanced with credit assessment, provisioning and risk management.

The division's earnings performance remains an important component of NAB's strategy to expand its position in Australian business banking.

Corporate and Institutional Banking Faces Higher Credit Costs

NAB's Corporate and Institutional Banking division experienced lower earnings during FY26.

Cash earnings excluding large notable items declined by approximately 6.1%.

The reduction reflected higher credit impairment charges and other operating factors affecting the division.

Corporate and Institutional Banking provides financial services to large businesses, institutional clients and government-related organisations.

Its activities include corporate lending, transaction banking, financial markets and specialised financing.

These businesses generate income through lending margins, fees and market-related activities.

However, larger corporate exposures can also result in significant impairment charges when individual borrowers experience financial difficulties.

During FY26, NAB recorded higher individually assessed credit impairment charges across its business lending operations.

These charges were concentrated in Corporate and Institutional Banking and Business and Private Banking.

The increase reflects financial pressure affecting selected borrowers and the bank's assessment of their ability to meet contractual obligations.

NAB continues monitoring credit quality across its business lending portfolio while maintaining its lending and risk management frameworks.

Credit Impairment Charges Increase 85.7%

Credit quality represented one of the most significant developments in NAB's FY26 results.

The bank recorded total credit impairment charges of AUD 1,547 million, compared with AUD 833 million in FY25.

This represented an increase of approximately 85.7%.

Credit impairment charges recognise expected losses arising when borrowers are unable, or are considered less likely, to meet their financial obligations.

The FY26 charge included AUD 1,083 million in individually assessed impairment expenses.

These charges primarily related to business lending exposures within Corporate and Institutional Banking and Business and Private Banking.

Individually assessed provisions generally relate to specific borrowers whose financial circumstances have deteriorated.

NAB also recorded AUD 464 million in collective provision charges.

Collective provisions are used to recognise expected credit losses across groups of loans based on economic assumptions, portfolio characteristics and other risk indicators.

The increase included AUD 403 million in additional forward-looking provisions.

These provisions reflected management's assessment of a more challenging economic environment.

An additional AUD 61 million in underlying collective charges reflected lending volume growth and some deterioration in credit quality during the second half of FY26.

The higher impairment expense reduced cash earnings despite improved underlying operating profitability.

Forward-Looking Provisions Reflect Economic Uncertainty

NAB increased its forward-looking credit provisions during FY26 as economic conditions became more challenging.

The additional AUD 403 million in provisions reflected concerns surrounding slower economic growth, higher interest rates and pressure on business and household finances.

Forward-looking provisions are based on expectations regarding future credit losses rather than losses that have already occurred.

Banks consider several economic indicators when assessing these provisions, including employment, economic growth, property prices and interest rates.

NAB's assessment incorporates the potential effects of slower Australian economic activity and higher borrowing costs.

Higher interest rates can increase Debt servicing requirements for households and businesses with variable-rate borrowing.

Businesses may also experience pressure from higher wages, energy expenses and other operating costs.

These factors can influence borrowers' ability to meet repayment obligations.

NAB's collective provisions as a percentage of credit risk-weighted Assets increased to 1.40%.

Total provisions represented approximately 1.76% of credit risk-weighted assets.

The increase provides additional coverage against potential credit losses, although future impairment charges will depend on economic conditions and actual borrower performance.

Asset Quality Indicators Reflect Pressure Across Lending Portfolios

NAB's FY26 results also showed changes in several measures of asset quality.

The ratio of non-performing exposures to gross loans and advances increased by 1 basis point to 1.56%.

Non-performing exposures include loans where borrowers are experiencing repayment difficulties or where full repayment is considered uncertain.

The Impaired Asset ratio increased by 5 basis points, primarily reflecting business lending exposures.

Meanwhile, the ratio of defaulted but not impaired assets declined by 4 basis points to 1.22%.

The reduction partly reflected growth in gross loans and advances, which increased the overall lending base used in calculating the ratio.

However, NAB also experienced higher arrears in its Australian home lending portfolio.

These developments highlight different credit trends across business and residential lending.

The bank continues assessing the performance of individual borrowers, industry sectors and loan portfolios to determine appropriate provisions.

Future changes in asset quality will depend on interest rates, employment conditions, business profitability and household income growth.

Operating Expenses Rise Following Accounting Adjustments

NAB reported total operating expenses of AUD 11,639 million during FY26, compared with AUD 9,848 million in FY25.

This represented an increase of approximately 18.2%.

However, the reported figure included AUD 1,347 million in large notable items.

Excluding these items, operating expenses increased by 4.5% to AUD 10,292 million.

The underlying increase reflected higher personnel expenses, technology investment and additional Depreciation and amortisation.

The bank also incurred higher expenses associated with its revised software capitalisation policy.

These increases were partly offset by productivity improvements, currency movements and lower expenses associated with certain customer remediation activities.

The cost increase remained below the 5.8% growth recorded in net operating income.

This contributed to improved underlying operating profit before credit impairment charges.

However, higher credit losses and notable items affected the bank's overall profitability.

NAB continues implementing operational changes intended to simplify its business structure and improve expenditure efficiency.

Restructuring Programme Targets Lower Cost Growth

NAB is undertaking a workforce and operational restructuring programme as part of its broader efficiency strategy.

The initiative involves reviewing organisational structures, technology systems and business processes.

The bank plans to reduce approximately 2,500 positions by September 2027 as part of the proposed restructuring.

The programme is expected to involve approximately AUD 300 million in associated restructuring costs.

These changes are intended to support a more efficient operating model and redirect resources towards customer services, technology and priority business activities.

For FY27, NAB expects underlying Operating Expense growth of less than 3%.

This guidance excludes the effects of additional restructuring charges and changes associated with the software capitalisation policy.

The bank also expects investment expenditure to remain broadly consistent with FY26.

Technology investment remains an important component of NAB's business strategy.

The company continues developing digital banking systems, Customer Service technology and operational platforms.

However, restructuring programmes can involve implementation expenses, workforce changes and operational disruption.

The effectiveness of NAB's initiatives will depend on its ability to achieve cost efficiencies while maintaining customer service standards and regulatory compliance.

Bank of New Zealand Experiences Lower Earnings

NAB's New Zealand banking operations contributed to the group's FY26 financial performance through Bank of New Zealand.

However, the division experienced lower earnings during the year.

Cash earnings excluding large notable items declined by approximately 14%.

The reduction reflected changes in operating conditions, higher expenses and other factors affecting the New Zealand banking market.

The New Zealand economy has experienced a period of slower growth and changing interest rate conditions.

These developments can influence lending demand, deposit pricing and borrower credit quality.

Bank of New Zealand provides residential mortgages, business lending, deposits and other financial services.

Its financial performance is influenced by economic conditions in New Zealand and movements in the New Zealand dollar.

Currency translation can affect NAB's consolidated results because earnings generated in New Zealand dollars are converted into Australian dollars.

NAB continues focusing on customer relationships, business lending and operational efficiency within its New Zealand operations.

Capital Adequacy Improves During FY26

NAB maintained a substantial regulatory capital position during FY26.

Its Common Equity Tier 1 (CET1) capital ratio increased to 11.87% at 30 September 2026, compared with 11.70% in FY25.

This represented an improvement of 17 basis points.

CET1 capital measures a bank's highest-quality regulatory capital relative to its risk-weighted assets.

It is an important indicator of the bank's ability to absorb financial losses while continuing to meet regulatory requirements.

The improvement reflected retained earnings, capital management activities and the contribution from its Dividend reinvestment arrangements.

NAB also benefited from the disposal of its remaining interest in MLC Life.

The group expects its CET1 ratio to reach approximately 12.07% on a pro forma basis after incorporating the anticipated capital impact of its final dividend reinvestment plan.

This compares with the bank's target of maintaining a CET1 ratio above 11.25%.

NAB's Liquidity coverage ratio averaged approximately 135% during the September quarter.

Its net stable funding ratio stood at 116%.

These measures indicate the bank's ability to meet short-term liquidity requirements and maintain stable funding over a longer period.

Capital and liquidity management remain important as NAB continues expanding lending while managing credit risks and regulatory requirements.

Dividend Maintained at AUD 1.70 Per Share

NAB's board declared a fully franked final dividend of 85 cents per share for FY26.

This brought the total annual dividend to AUD 1.70 per share, unchanged from FY25.

The full-year distribution comprised an Interim Dividend of 85 cents and a final dividend of 85 cents per share.

Both payments were fully franked.

The unchanged dividend reflected the bank's capital management decisions despite lower statutory and cash earnings.

NAB continues balancing distributions with regulatory capital requirements, business investment and credit risk management.

The bank's CET1 ratio of 11.87% remained above its stated capital target, providing additional financial flexibility.

However, future dividends will depend on profitability, credit conditions, capital requirements and the board's assessment of the bank's financial position.

Australian Economic Outlook Indicates Slower Growth

NAB expects Australian economic growth to remain subdued over the near term.

The bank's economic forecasts indicate real gross domestic product growth of approximately 1.4% during calendar 2026.

Growth is expected to moderate further to around 1.0% in 2027.

These projections reflect the effects of higher interest rates, inflationary pressures and slower household spending.

NAB expects the Australian Unemployment rate to increase gradually to approximately 5.5% by early 2028.

A higher unemployment rate can affect household income stability and loan repayment capacity.

Business activity may also be influenced by higher operating expenses and lower consumer demand.

NAB expects Australia's official cash rate to remain at approximately 4.85% for some time.

The interest rate outlook reflects continued concerns surrounding Inflation and the need to balance economic activity with price stability.

Higher rates can support bank interest income in certain circumstances, but they can also increase funding expenses and pressure borrowers.

The eventual effect on NAB will depend on its loan and deposit pricing, lending growth and credit impairment experience.

New Zealand Economic Outlook Reflects Gradual Recovery

NAB expects New Zealand's economy to continue recovering during calendar 2026 and 2027.

The bank forecasts real GDP growth of approximately 2.1% in 2026 and 2.8% in 2027.

The outlook reflects improving activity in selected sectors and a gradual recovery in domestic demand.

However, economic conditions remain influenced by interest rates, inflation and household spending.

NAB's economic assumptions incorporate changes in Monetary Policy as the Reserve Bank of New Zealand responds to inflationary pressures.

The bank expects further increases in New Zealand's official cash rate during 2027.

Higher borrowing costs may influence mortgage demand, business investment and debt servicing capacity.

For Bank of New Zealand, lending volumes, net interest margins and credit impairment charges will remain important indicators of financial performance.

Key Risks and Operational Considerations

Credit risk remains one of the principal factors influencing NAB's earnings outlook.

The increase in credit impairment charges during FY26 highlights the financial pressure affecting selected business lending customers.

If economic conditions deteriorate further, NAB may experience additional borrower defaults and higher provisions.

Residential mortgage arrears also require monitoring, particularly as higher interest rates influence household repayment obligations.

Interest rate movements represent another important consideration.

While higher rates can support lending margins, competition for deposits and loans can influence profitability.

NAB also faces operational risks associated with its restructuring programme.

Workforce reductions, technology changes and adjustments to internal processes may create implementation challenges.

Cybersecurity, Fraud prevention and regulatory compliance remain important responsibilities for large banking institutions.

The bank must also maintain sufficient capital and liquidity while supporting lending growth and meeting Shareholder distribution commitments.

Changes in economic growth, inflation and employment conditions across Australia and New Zealand could influence the financial performance of its lending portfolios.

What Lies Ahead for National Australia Bank in FY27?

NAB enters FY27 with higher operating revenue, improved net interest margins and an increased regulatory capital ratio, although credit impairment charges remain elevated.

The bank expects underlying operating expense growth of less than 3%, excluding additional restructuring expenses and the effects of its software capitalisation policy changes.

Management continues focusing on business lending growth, deposit funding and improving direct home lending distribution.

The proposed workforce restructuring is intended to reduce operating complexity and improve cost efficiency over time.

Credit quality will remain a central consideration, particularly across business lending portfolios that contributed to higher impairment charges during FY26.

The bank's forward-looking provisions reflect expectations of a more challenging Australian economic environment.

NAB's first-quarter FY27 trading update, expected in early 2027, will provide further information regarding lending growth, margins, expenses and credit quality.

The FY27 half-year results, expected in May 2027, will offer a more comprehensive assessment of financial performance.

Future profitability will depend on the bank's ability to maintain revenue growth, manage operating costs and limit credit losses while navigating changing interest rates and economic conditions.

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