National Australia Bank (NAB) reported steady cash earnings and improved return on equity in the first half of 2025, underpinned by strong capital ratios and a clear strategic focus on business banking, deposits, and proprietary home lending.
- Cash earnings and ROE increased despite a challenging environment
- CET1 capital ratio remains robust above 12%, supported by disciplined capital management
- Business banking, deposits, and proprietary home lending identified as key growth priorities
- Asset quality shows some deterioration with higher non-performing loans, mainly in business lending
- Ongoing investments in digital transformation, cybersecurity, and customer experience enhancements
Steady Financial Performance Amidst Challenges
National Australia Bank (NAB) has delivered a stable financial performance for the first half of 2025, reporting increased cash earnings and a higher return on equity (ROE) despite a persistently challenging economic environment. The bank’s underlying profit rose modestly by 1.9% half-on-half, while cash earnings showed resilience, reflecting NAB’s disciplined approach to managing costs and capital.
The bank’s Chief Executive Officer, Andrew Irvine, highlighted that NAB’s capital ratios, provisioning, and liquidity remain strong, providing a solid foundation to support customers through economic cycles. NAB’s Common Equity Tier 1 (CET1) ratio stood above 12%, comfortably exceeding regulatory requirements and reflecting ongoing capital management initiatives, including $8 billion in on-market share buybacks since August 2021.
Strategic Priorities Driving Growth
NAB’s refreshed strategy focuses on three key priorities: strengthening business banking, growing deposits, and expanding proprietary home lending. The bank has made notable progress in these areas, with business banking lending growing at 0.8 times system growth and a 25% year-on-year increase in proprietary home lending drawdowns. Deposits also grew above system rates, supported by innovative payment solutions and enhanced customer onboarding processes.
The bank’s Business & Private Banking division continues to deepen its market share, particularly in the SME segment, supported by a relationship-led approach and digital enablement. NAB’s investment in technology and data analytics is driving faster, more seamless customer experiences, including a new end-to-end digital business lending platform and AI-powered tools to support bankers.
Asset Quality and Provisioning
While NAB’s asset quality has shown some deterioration, particularly in business lending, the bank maintains robust provisioning levels. Non-performing loans have increased, driven mainly by default but not impaired exposures, reflecting seasoning impacts and broad-based industry challenges. However, NAB reported a net release of $194 million in forward-looking provisions, indicating confidence in the underlying portfolio resilience.
The bank continues to work closely with customers facing difficulties, maintaining a well-diversified and highly secured loan book. Credit impairment charges decreased slightly half-on-half, and NAB’s collective provisions remain strong at 1.42% of credit risk-weighted assets.
Digital Transformation and Regulatory Compliance
NAB is advancing its digital transformation journey, with significant investments in modernising technology and enhancing cybersecurity. The bank has successfully consolidated multiple legacy systems, migrated 85% of its applications to the cloud, and deployed GenAI-powered tools to improve customer and colleague experiences.
On the regulatory front, NAB has completed all required activities under the AUSTRAC Enforceable Undertaking, which mandated improvements in anti-money laundering and counter-terrorism financing controls. The bank continues to invest in financial crime systems and collaborates with industry and law enforcement to protect customers against scams and fraud.
Outlook and Market Position
Looking ahead, NAB remains cautiously optimistic about the Australian economy, which is well positioned amid geopolitical uncertainties and moderating inflation. The bank expects the Reserve Bank of Australia to ease interest rates further, supporting household incomes and credit growth.
With a clear strategic focus, strong capital base, and ongoing investments in technology and customer advocacy, NAB aims to deliver sustainable returns and deepen its market leadership across business banking, deposits, and home lending.
Bottom Line?
NAB’s disciplined execution and strong capital position set the stage for navigating economic uncertainties while pursuing sustainable growth.
Questions in the middle?
- How will NAB manage asset quality risks if economic conditions worsen?
- What impact will the completion of the MLC Life Insurance stake sale have on capital and earnings?
- How quickly can NAB scale its proprietary home lending to compete with broker channels?