NAB Reports 2% Drop in Cash Earnings, 3% Revenue Rise in 1Q25

Solid Revenue Growth Meets Rising Credit Costs

National Australia Bank (NAB) has reported its first quarter trading update for FY25, showing a nuanced performance marked by a 2% decline in cash earnings relative to the second half of 2024 quarterly average. This dip was primarily driven by higher credit impairment charges and increased income tax expenses, offsetting a 4% underlying profit growth.

Revenue climbed 3%, largely propelled by stronger Markets & Treasury (M&T) income. Excluding M&T, revenue remained broadly stable, balancing volume growth against margin pressures. The net interest margin experienced a slight contraction, influenced by elevated funding costs, competitive lending conditions, and deposit dynamics, though partially buoyed by a higher interest rate environment.

Credit Quality and Capital Position

Credit impairment charges rose to $267 million, reflecting deterioration mainly in Australian business lending and unsecured retail portfolios. Individually assessed charges accounted for $152 million, with collective provisions at $115 million, the latter impacted by asset quality trends and lending volume growth. Despite this, the ratio of gross impaired assets to gross loans remained steady at 0.20%, while non-performing exposures edged up slightly to 1.43%.

The Group’s Common Equity Tier 1 (CET1) ratio declined to 11.6% from 12.4% in September 2024, influenced by dividend payments and a $13.2 billion increase in credit risk weighted assets. NAB’s leverage ratio stood at 4.8%, with liquidity coverage and net stable funding ratios comfortably above regulatory minimums, underscoring a robust capital and liquidity framework.

Strategic Focus and Operational Efficiency

CEO Andrew Irvine highlighted the bank’s progress in executing its refreshed strategy aimed at becoming the most customer-centric company in Australia and New Zealand. NAB has enhanced deposit growth by 2%, with home lending up 1% and business lending rising 2%, including a 1% increase in SME lending.

Operationally, expenses rose 2%, driven by higher personnel costs, financial crime-related expenses, and technology investments. However, these were partly offset by productivity gains and reduced costs linked to the Group’s enforceable undertaking with AUSTRAC. NAB targets productivity savings exceeding $400 million for FY25 and aims to keep operating expense growth below last year’s 4.5% increase.

Community and Customer Initiatives

The bank continues to invest in customer convenience, expanding branch hours to Saturdays in key locations and joining BioCatch Trust Australia to enhance fraud prevention through real-time inter-bank intelligence sharing. NAB also supports sustainability efforts with a $300 million green loan program in partnership with the Australian Government’s Clean Energy Finance Corporation, encouraging businesses and farmers to adopt emissions-reducing technologies.

While the economic outlook shows signs of improvement, NAB remains cautious amid ongoing cost-of-living pressures and interest rate challenges. The bank maintains prudent balance sheet settings to support customers and safeguard its financial position.