NAB –5.37%: Was one of the few stocks down on a strong day for local equities as the bank reported weaker-than-expected FY26 numbers, with cash profit missing consensus by a fair margin. Higher impairment charges and operating costs weighed on earnings, while the bank flagged a more challenging economic outlook.
FY26 highlights:
- Cash profit of $6.14bn, below the $6.59bn consensus; final dividend unchanged at 85¢ per share.
- NIM improved to 1.80% from 1.74%, while cash ROE fell to 9.9% from 11.4%.
- Credit impairment charges increased to $1.55bn from $833m, reflecting higher provisions amid slowing growth, falling house prices and higher rates.
- Operating expenses rose 18% to $11.64bn, although FY27 underlying expense growth is expected to be below 3%.
- Final dividend held at 85 cents per share, taking full-year payout to 170 cents.
- CET1 capital ratio remained solid at 11.9%.
MM’s view: The result highlights growing pressure on Aussie banks from higher costs and deteriorating credit conditions. While NAB’s NIM improved and management expects cost growth to moderate, rising impairments and a softer housing market remain key risks. We’ll be watching credit quality closely as higher rates continue to place pressure on mortgage borrowers and business customers. However, not all Big Four are made equal, we still like ANZ and Westpac in the sector with their earnings mix (less exposure to business banking) and valuations remaining relatively attractive.
MM is neutral towards NAB, preferring ANZ & WBC
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