NAB profit rises but mortgage slump and cautious guidance send shares tumbling
NAB's cash profit rose on lower bad-debt charges, but it warned of more at-risk loans, and like its peers, a weakening mortgage market.
Source: National Australia Bank
Mentioned
KEY POINTS
- Cash profit rose but the gain came almost entirely from lower bad-debt charges, not stronger underlying earnings, which stayed broadly flat.
- Business banking carried the result, but there were early signs of credit strain with NAB increasing the money it sets aside for loans that may not be repaid.
- This article unpacks why NAB's economists caution on housing credit growth may have led to its share price falling.
National Australia Bank (NAB) posted a 2% rise in third-quarter cash profit on the first-half quarterly average, helped by lower bad-debt charges and steady growth across its Business & Private Bank division. NAB also pointed to solid growth in lending and deposits across the group, and margins it said were well managed.
But the result was not all positive, with the bank upping its provisions for loans that could go bad in the future. Mortgage applications also fell 15% over the quarter, in line with the other major banks that reported last week.
“The combined impacts of the Middle East conflict, higher domestic interest rates and recent tax changes in the Federal Budget are creating challenges and uncertainties for our customers,” said NAB CEO, Andrew Irvine.
NAB's economists expect housing credit growth to slow to 2.5% across the market in FY27, down from 6.7% this year, guidance that likely led investors to dump the bank’s shares – down 5.3% to $39.17 at the time of writing.
NAB's 3Q26 numbers in focus
Cash earnings up 2% to $1.83bn vs 1H26 quarterly average (+5% vs 3Q25)
Statutory net profit up 32% to $1.81bn vs 1H26 quarterly average (+4% vs 3Q25)
Net interest margin down 2 bps to 1.79%
CET1 (Level 2) up 28 bps to 11.93% vs Mar-26
Credit impairment charge down 15% to $299m vs 1H26 quarterly average (+18% vs 3Q25)
Collective provision charge $119m, up from $39m in 2Q26
NAB's third-quarter cash profit rose 2% to $1.83 billion against the first-half quarterly average, and was up 5% on the same quarter last year. The lift was driven almost entirely by a 15% fall in credit impairment charges rather than stronger underlying profit, which was broadly flat.
Business banking did the heavy lifting on volumes as business lending rose 2%, including 4% growth in the Business and Private Bank. Total deposits lifted 2% and NAB kept building out its proprietary home lending. But that same book is where the early strain is showing: NAB said its larger collective provision charge of $119 million in 3Q26 was driven by “business lending volume growth and deterioration in performing book asset quality.”
The net interest margin held steady at 1.79%, down 2 basis points on the half but 2 points higher once volatile markets and treasury income is stripped out. The margin is the gap between what a bank earns on its loans and what it pays out on deposits and funding, and it shows how profitable its core lending business is. NAB said the underlying improvement reflected higher earnings on the hedges it holds against its deposits and capital, partly offset by competition for loans.
The Common Equity Tier 1 ratio rose to 11.93% from 11.65% in March, leaving it comfortably above NAB's target of more than 11.25%. The ratio measures a bank's core capital against its loans and other risks, and acts as the safety buffer regulators watch to ensure it can absorb losses in a downturn. NAB put the increase down to cash earnings outweighing growth in risk-weighted assets.
Forward guidance
NAB's own economists expect housing credit growth to slow sharply, forecasting 2.5% growth across the market in FY27, down from 6.7% in FY26. That 2.5% forecast sits well below the 5-7% Commonwealth Bank (CBA) expects over the coming year, pointing to a sharper slowdown than rivals are pencilling in. Business credit growth, meanwhile, is tipped to ease to 7%, from 10.5% in FY26.
The bottom line: the result leaves NAB leaning on its business franchise for strength, just as the first signs of credit strain begin to surface in that same book. It appears investors focused on that caution rather than the profit rise – sending the bank’s shares tumbling.
The next bank to release its results is Judo Bank on Tuesday, with Bendigo and Adelaide Bank to follow next week.
You can keep tabs on the reporting dates and key earnings numbers for over 250 ASX stocks in our Reporting Season Calendar.
