NAB reports 8.7% revenue growth and 19.3% net profit decline in 1H26

Software Amortisation Clouds Profit Despite Revenue Growth

National Australia Bank (ASX:NAB) posted a mixed half year result for the six months ending March 2026, with revenue climbing 8.7% to $11.158 billion but net profit attributable to owners falling 19.3% to $2.75 billion. The key culprit was a $949 million accelerated amortisation charge on software assets, a one-off accounting policy change reflecting a shorter useful life and stricter capitalisation thresholds for technology investments.

Excluding this large notable item, NAB’s cash earnings increased by 2.3% compared to the prior half, with underlying profit rising 6.4%. This underlying strength was driven by solid growth in Business and Private Banking (B&PB), which saw earnings rise 9.9% to $1.85 billion, supported by a 4.6% increase in business lending balances and market share gains in SME and total business lending. Deposits also grew, with transaction accounts up 8.0% across B&PB and Personal Banking.

Credit Impairment Charges Increase Amid Geopolitical Risks

Credit impairment charges rose sharply by 45.6% to $706 million, driven by a $300 million increase in forward-looking collective provisions. NAB cited the heightened uncertainty from the ongoing Middle East conflict as a key driver for this cautious stance, with overlays targeting sectors vulnerable to fuel supply disruptions and cost pressures, including Agriculture, Transport & Storage, Manufacturing, Construction, and Commercial Real Estate.

The ratio of collective provisions to credit risk-weighted assets (CRWA) ticked up 2 basis points to 1.35%, while total provisions represented 1.68% of CRWA. Non-performing exposures increased modestly by 1.2% to $12.24 billion, with a slight rise in impaired assets reflecting a small number of downgrades in Corporate and Institutional Banking.

Balance Sheet Strength Maintained with Capital Raising Underway

NAB’s Common Equity Tier 1 (CET1) capital ratio stood at 11.65% as at 31 March 2026, slightly down from 11.70% six months earlier due to volume growth and market volatility impacts. However, the bank has strengthened its capital position through a partially underwritten Dividend Reinvestment Plan (DRP) with a 1.5% discount, expected to raise approximately $1.8 billion and lift the pro forma CET1 ratio to 12.05%. This buffer provides resilience amid a volatile macroeconomic environment.

Liquidity and funding metrics remain robust, with a Liquidity Coverage Ratio (LCR) of 132% and a Net Stable Funding Ratio (NSFR) of 116%, well above regulatory minimums. Term wholesale funding issuance has been diversified across products, currencies and maturities, with a weighted average term of 5.2 years.

Strategic Progress on Customer Advocacy and Technology Modernisation

NAB continues to execute its strategy focused on customer advocacy, speed, simplicity and technology modernisation. The bank has reduced its product range by 27% since FY22 and decommissioned around 500 legacy applications since October 2023. This simplification is expected to accelerate delivery of customer outcomes and improve operational resilience.

Customer Net Promoter Scores (NPS) improved across key segments over the past year, with Medium and Large Business NPS rising 16 points to equal first among major banks, and High Net Worth and Mass Affluent NPS up 14 points. The NAB Customer Voices program, launched in FY25, is now embedded in over half of priority frontline teams, helping to capture and act on customer feedback more systematically.

Outlook Clouded by Inflation and Geopolitical Uncertainty

The Australian economy entered 2026 on a strong footing but faces headwinds from rising inflation and geopolitical tensions. The Reserve Bank of Australia has tightened monetary policy with recent cash rate increases, and further hikes are expected. NAB forecasts year-on-year real GDP growth to slow to 1.5% in 2026, with unemployment peaking at 4.75%. The Middle East conflict adds significant uncertainty, with potential inflationary shocks and growth risks.

New Zealand’s economy is more fragile, with subdued growth and rising unemployment. The Reserve Bank of New Zealand is expected to raise rates later this year amid inflation pressures. NAB’s New Zealand Banking division reported stable revenue and a 3.4% increase in cash earnings (NZD), supported by above-system growth in household deposits and home lending.

Investors can note NAB’s interim dividend remains steady at 85 cents per share, fully franked, payable 2 July 2026. The DRP’s 1.5% discount and partial underwriting aim to support capital levels during this uncertain period. The bank’s cautious credit provisioning and capital management reflect a prudent approach to navigating a volatile environment.

The March 2026 half results build on NAB’s recent capital and provisions update amid geopolitical risks, and the bank’s strategic focus on strong business lending growth remains evident. The dividend announcement follows the bank’s consistent payout policy with fully franked 85c dividends.