Rising Credit Costs Test NAB’s Stable Profit and Capital Position in FY25

Solid Financial Performance Amid Strategic Execution

National Australia Bank (NAB) has reported a modest 1% increase in underlying profit for the full year ended September 2025, reflecting steady momentum as it executes the first year of its refreshed strategy. Cash earnings were broadly stable, down just 0.2% compared to the prior year, underscoring resilience in a challenging economic environment.

Revenue growth of 2.9% was driven primarily by volume increases and stronger Markets & Treasury income, partially offset by remediation charges and business disposals. Expenses rose 4.6%, influenced by a $130 million payroll review and remediation charge, but productivity benefits of $420 million helped mitigate cost pressures.

Asset Quality and Capital Position

Credit impairment charges increased to $833 million from $728 million in FY24, reflecting some deterioration in the business lending portfolio and Australian unsecured retail loans. However, NAB noted improvements in asset quality during the second half of the year, supported by moderating inflation and easing interest rate pressures. The ratio of non-performing exposures rose to 1.55%, with impaired assets and default-but-not-impaired loans both increasing slightly.

The bank’s Common Equity Tier 1 (CET1) capital ratio declined by 65 basis points to 11.70%, driven by lending growth, increased long-term investments, and $0.6 billion in share buy-backs. Adjusted for the sale of its remaining 20% stake in MLC Life, the pro forma CET1 ratio stands at 11.81%, comfortably above NAB’s target threshold.

Growth in Key Business Segments

Business and Private Banking saw a 1.6% increase in cash earnings, supported by volume growth and market share gains in SME lending. Personal Banking delivered a robust 9.9% rise in earnings, driven by higher margins and volume growth, alongside investments in proprietary home lending channels. Corporate and Institutional Banking grew earnings by 4.7%, benefiting from higher Markets income and disciplined growth strategies. New Zealand Banking also posted a 2.8% increase despite a challenging local economy.

Deposit balances across the group rose 7%, with new business and retail transaction account openings up 16%. Australian home lending drawdowns via proprietary channels improved to 41% from 38%, reflecting targeted investments in frontline bankers and technology-enabled solutions.

Customer Advocacy and Strategic Outlook

NAB’s renewed focus on customer experience is embodied in the rollout of its NAB Customer Voices program, which has already delivered meaningful improvements in customer interaction Net Promoter Scores (NPS). Further expansion of this program is planned for FY26 to sustain momentum.

CEO Andrew Irvine expressed optimism about the outlook, highlighting a clear strategy focused on sustainable growth, strong returns, and prudent risk management. The bank’s commitment to environmental finance also continued, with $10.4 billion deployed in FY25 towards supporting Australia’s transition to a low carbon economy.