National Australia Bank kicked off FY26 with a robust first quarter, posting a 15% increase in cash earnings driven by stronger underlying profits and improved asset quality. The bank’s strategic push in business and home lending, alongside disciplined cost management, underpinned this solid performance.
- Cash earnings up 15% versus prior half-year quarterly average
- Underlying profit growth of 12%, supported by 6% revenue rise
- Business lending grows 2% with SME market share gains
- Improved asset quality with lower non-performing exposures
- CET1 capital ratio slightly down to 11.48% amid dividend and RWA growth
Strong Start to FY26
National Australia Bank (NAB) has reported a promising start to the 2026 financial year, with cash earnings for the December quarter rising 15% compared to the average of the prior half-year quarters. This uplift was primarily driven by a 12% increase in underlying profit and a notable reduction in credit impairment charges, signalling both operational strength and improving asset quality.
Revenue climbed 6%, bolstered by volume growth, higher fees and commissions, and a decline in customer-related remediation costs. The net interest margin (NIM) edged up by 2 basis points to 1.80%, reflecting improved deposit earnings despite competitive lending pressures. Meanwhile, expenses remained broadly flat, with increased technology and personnel costs offset by productivity gains and lower restructuring expenses.
Focused Growth in Lending and Deposits
NAB’s strategic priorities are clearly reflected in its lending and deposit growth. Australian business lending expanded by 2%, including a 3% rise within the Business & Private Banking division, accompanied by market share gains in both SME and total business lending segments. Home lending also outpaced the system (excluding Advantedge run-off), with proprietary channel drawdowns increasing from 41% to 46% quarter-on-quarter.
Deposit balances in Business & Private Banking and Personal Banking rose 3%, with transaction accounts growing 6% excluding offsets. The successful migration of Citi Consumer Business customers onto NAB’s systems during the quarter further strengthens the bank’s retail franchise and operational integration.
Asset Quality and Capital Position
Asset quality showed encouraging signs, with the ratio of non-performing exposures to gross loans and acceptances falling by 8 basis points to 1.47%. The credit impairment charge of $170 million mainly related to Australian business lending and unsecured retail portfolios, while a net collective provision release of $40 million reflected portfolio refinements and volume growth.
On the capital front, NAB’s Common Equity Tier 1 (CET1) ratio on a Level 2 basis dipped slightly to 11.48%, influenced by dividend payments and a $6 billion increase in risk-weighted assets (RWA). This was partly offset by cash earnings and the sale of the remaining 20% stake in MLC Life. The bank also maintained strong liquidity metrics and raised $15.8 billion in term wholesale funding, underscoring its robust funding position.
Customer Experience and Community Support
NAB continues to invest in customer experience improvements, launching new appointment tools and NAB Financial Centres that integrate premier, private banking, and home lending specialists. The Customer Voices program has resolved over 300 elevated issues, enhancing service quality. Additionally, NAB has provided substantial disaster relief grants to support communities affected by severe weather events, reflecting its commitment to social responsibility.
CEO Andrew Irvine emphasised the bank’s disciplined execution of strategy, highlighting productivity targets of over $450 million in savings for FY26 and controlled expense growth. This balanced approach aims to sustain growth while managing costs and supporting customers through evolving economic conditions.
Bottom Line?
NAB’s solid Q1 momentum sets the stage for a competitive FY26, but sustaining growth amid rising RWAs and capital pressures will be key to watch.
Questions in the middle?
- How will NAB balance continued lending growth with capital and regulatory demands?
- What impact will competitive pressures have on net interest margins going forward?
- Can productivity gains offset rising technology and personnel costs sustainably?