National Australia Bank Limited

NAB reported first-half 2026 underlying profit up 6.4%, cash earnings up 2.3% excluding notable items, and revenue up 3.1%. Statutory profit declined 18%, mainly due to a $1.35 billion accelerated amortization charge from changes to software capitalization policy, partly offset by the gain on sale of the remaining 20% stake in MLC Life. Net interest margin increased 3 basis points, and operating expenses declined 0.5% excluding the notable item. Credit impairment charges were $706 million, equal to 18 basis points of gross loans and advances, including a $300 million top-up to forward-looking provisions; total provisions rose to $1.93 billion. The March CET1 ratio was 11.65%, and management said the 1.5% discounted DRP plus partial underwriting should add about $1.8 billion and lift pro forma CET1 to 12.05%. Management did not give formal next-quarter earnings guidance, but said business credit growth, which was running at around 10% annualized in the first half, is expected to moderate in the second half; it also said FY26 term funding issuance is expected to be around $36 billion and FY26 productivity savings remain targeted at greater than $450 million.

Andrew Irvine emphasized that NAB is benefiting from good operating momentum, stable margins and broad-based credit growth, while also taking a more defensive stance on the balance sheet because of increased macro uncertainty. He repeatedly framed the strategy around being “more customer-centric,” simpler, faster and more resilient, with priorities to grow business banking, grow deposits and strengthen proprietary home lending. His tone was confident but cautious: he said the outlook is more challenging, yet NAB is well positioned and remains disciplined on costs, capital and customer support.

Inder Singh focused on the mechanics behind the numbers. He said revenue rose 3.1% on volume growth and stronger markets and treasury income, while NIM was broadly stable after adjusting for markets/treasury and liquids; lending margin compression was partly offset by higher earnings on the deposit replicating portfolio, and replicating portfolio returns are estimated at about 5 basis points in the second half. He also detailed the $1.35 billion software amortization charge, the $706 million impairment charge, the $300 million increase in forward-looking provisions, the 11.65% CET1 ratio, and the expected roughly $36 billion of FY26 term funding issuance; he reiterated FY26 cost growth should be below 4.6% with productivity savings above $450 million.

Analysts pressed management on rising unsecured consumer losses, elevated commercial impairment charges, capital/RWA sensitivity if credit weakens, and the impact of the software capitalization change on cost optics and dividend reinvestment. Management said the unsecured uptick was modest and mostly seasonal plus some temporary effects from the Citi book migration, not a major deterioration. On commercial portfolios and capital, NAB said domestic asset quality improved in the first half, but it is being prudent given uncertainty; Inder also said that under base-case assumptions RWA could rise by around $3 billion over the next 12 to 18 months. On dividends and the DRP, management said the 72.5% payout ratio is at the upper end of policy and that if growth opportunities remain attractive, DPS growth may lag EPS growth while capital is reinvested in the business.