NAB’s Asset Quality Worries Amid Strong Profit and Tech Gains

Financial Performance and Strategic Focus

National Australia Bank (NAB) closed FY25 with a 1.3% increase in underlying profit to $7.1 billion, supported by strong revenue and volume growth in the second half of the year. Despite a slight dip in statutory profit, the bank maintained a robust capital position, with a Common Equity Tier 1 (CET1) ratio comfortably above its 11.25% target, reflecting disciplined capital management and balance sheet strength.

The bank’s strategy continues to emphasize customer-centricity, with clear priorities on expanding business banking, growing deposits, and strengthening proprietary home lending. These efforts are underpinned by ongoing investments in technology and innovation, aiming to deliver seamless customer experiences and operational efficiencies.

Technology Modernization and AI Integration

NAB has accelerated its digital transformation journey, achieving a 24% reduction in technology modernization score over two years and migrating 90% of its applications to the cloud. The bank is leveraging artificial intelligence extensively, with over 4,500 engineers using generative AI for software development and more than 15,000 colleagues benefiting from AI tools that reduce routine task time. This tech-driven approach is designed to enhance customer service, improve banker productivity, and enable faster, more seamless lending and deposit processes.

Customer Advocacy and Market Position

Customer advocacy metrics show positive momentum, with NAB ranking #2 in mass consumer and business Net Promoter Scores among major Australian banks. The bank’s proprietary home lending drawdowns increased by 46%, supported by improved banker productivity and enhanced digital tools. Business banking growth remains strong, with NAB holding a 22% market share in Australian business lending and continuing to deepen sector specializations in agriculture, health, and commercial real estate.

Asset Quality and Provisioning

While asset quality showed some deterioration, particularly in business lending and New Zealand banking, NAB maintained appropriate provisioning levels. The collective provision to credit risk-weighted assets ratio stood at 1.33%, with forward-looking provisions reflecting a cautious but balanced view of economic conditions. The bank reported a net release of $89 million from forward-looking provisions in 2H25, offset by increased individually assessed provisions related to specific customers.

Sustainability and Social Impact

NAB has achieved its $6 billion affordable and specialist housing financing target four years ahead of schedule and set a new $60 billion ambition to 2030. The bank is also advancing First Nations economic empowerment through targeted lending and partnerships. Its climate strategy includes significant financing for renewable energy and energy-efficient projects, with ongoing investments in climate risk tools and sector-specific transition plans. NAB’s sustainability efforts are integral to its long-term growth and risk management framework.

Outlook and Future Priorities

Looking ahead, NAB plans to complete the migration of the Citi Consumer Business by December 2025 and continue disciplined cost management with productivity targets exceeding $450 million. The bank remains focused on delivering sustainable growth and returns, leveraging technology and AI to enhance customer experiences while maintaining prudent balance sheet settings amid evolving economic conditions.