NAB Warns of Inflation Risks as Annual Cash Profit Falls 13% — Update

By Stuart Condie

SYDNEY--National Australia Bank reported a larger-than-expected 13% fall in annual cash profit, raising credit impairments and warning that stubbornly high inflation poses material risks to the country's economy.

NAB, Australia's second-largest lender by market capitalization, on Thursday reported a cash profit for the 12 months through September of 6.14 billion Australian dollars, equivalent to US$4.28 billion. Net operating income rose by 5.8% to A$22.01 billion.

Credit impairment charges rose by 86% to A$1.55 billion, which NAB said included top-ups to forward-looking provisions to reflect more challenging economic conditions.

The Reserve Bank of Australia this week raised the cash rate for the fifth time in 2026, hiking it to an 18-year-high of 4.85% in an attempt to tame inflation.

NAB said it expects the RBA to now hold the rate while it watches for the impact of higher borrowing costs, which have already contributed to a drop in housing prices, on the economy.

The bank's economists expect Australia's unemployment rate, which was 4.7% in September, to a peak of about 5.5% by early 2028.

"Uncertainty remains elevated. Cost pressures continue to pose a material risk to the economy, while the correction in the housing market poses some additional downside risk to growth," NAB Chief Executive Andrew Irvine said.

Stripping out the impact of A$1.35 billion in previously disclosed software amortization costs, cash earnings were flat at A$7.09 billion. Analysts had been looking for cash earnings of A$6.34 billion, or A$7.24 billion excluding the one-off amortization charge.

On a statutory basis, reported an annual net profit of A$6.14 billion. That compared with A$7.09 billion a year earlier and an average analyst forecast of A$6.34 billion,

Net operating income rose by 5.8% to A$22.01 billion and net interest margin expanded 6 basis points to 1.80%, as NAB benefited from higher earnings on deposit and capital replicating portfolios, partially offset by lending competition.

NAB, which held its final dividend at A$0.85 a share as widely expected by analysts, said its share of Australian business lending grew to 21.7% from 21.6% a year earlier. Its share of business deposits rose to 21.1%, from 20.7%.

Its share of household deposits was flat at 13.8%, but its share of household lending slipped to 14.0% from 14.2% amid stiff mortgage competition from its major banking peers and others.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

November 04, 2026 17:49 ET (22:49 GMT)