NAB faces higher credit losses and a $300 million restructuring charge

Credit costs and software amortisation reshape FY2026 result

NAB’s headline profit took a substantial hit in FY2026, despite higher revenue and lending volumes. Statutory net profit attributable to shareholders fell 9.1% to $6.143 billion, while cash earnings declined 13.4% to $6.141 billion. Net operating income rose 6.6% to $22.242 billion, but the benefit was absorbed by a sharp rise in credit costs and a large accounting charge tied to the bank’s software estate.

The credit impairment charge almost doubled, rising 85.7% to $1.547 billion. NAB increased forward-looking provisions by $403 million as it allowed for a more difficult economic outlook, while individually assessed provisions also rose. Total provisions for credit impairment reached $6.801 billion, up 10.3% year on year, and non-performing exposures increased 5.9% to $12.812 billion.

The software charge was the other major drag. NAB accelerated amortisation by $1.347 billion before tax after revising the useful life and application of its capitalisation policy. This was the same accounting reset flagged in the March software amortisation charge, which had already affected the first-half result. Management said the change better reflects a rapidly changing technology environment; it also reduced the carrying value of capitalised software to $2.196 billion from $3.430 billion.

Underlying income held up, but margins and risk remain contested

There is a more resilient number beneath the statutory decline. Excluding large notable items, cash earnings were $7.090 billion, broadly flat on the prior year, while underlying profit increased 6.9%. Net interest income rose 6.4% to $18.512 billion on larger average interest-earning assets and a six-basis-point lift in the net interest margin to 1.80%.

Business and Private Banking was the standout division, with cash earnings up 10.7% to $3.685 billion as business lending increased 10.5%. Personal Banking cash earnings rose 8.7% to $1.362 billion. By contrast, Corporate and Institutional Banking fell 6.1% to $1.740 billion, while New Zealand Banking declined 7.0% in local currency terms, with higher credit impairment charges weighing on both businesses.

The balance sheet provided some counterweight. Customer deposits rose 5.2% to $692.6 billion and gross loans increased 5.2% to $822.4 billion. The CET1 ratio improved to 11.87%, above NAB’s greater-than-11.25% operating target, with the final dividend reinvestment plan expected to lift the pro forma ratio to about 12.07%. The capital response follows the capital and provisioning measures announced during the first half as the bank prepared for a more uncertain economic environment.

Dividend held as management confronts efficiency and control issues

NAB declared a final dividend of 85 cents per share, fully franked, taking the full-year payout to 170 cents, unchanged from FY2025. That represents an 85% statutory payout ratio, a larger share of reported earnings than last year. The final dividend is scheduled for payment in December, with a 1.5% discount applying under the dividend reinvestment plan.

The remuneration report adds a less comfortable gloss to the resilience narrative. The Board cut the Group Performance Indicator to 95% of target after identifying shortcomings in financial crime, conduct and compliance risk, as well as delays in complex transformation and customer remediation programs. Nine executives, including chief executive Andrew Irvine, received five-percentage-point individual performance reductions, while prior-year remuneration adjustments across 16 current and former executives totalled about $1.685 million.

That emphasis on control matters because NAB enters FY2027 with a planned operating-model simplification that is expected to remove up to 2,500 roles and generate a restructuring charge of about $300 million before tax. The filing says customer-facing banking roles are not expected to be materially affected, but the cost savings, transformation delivery and risk remediation now sit alongside credit quality as the key tests of whether the bank’s operational reset produces durable earnings rather than another round of accounting and restructuring noise.