The National Australia Bank Ltd (ASX: NAB) share price is under the spotlight today after reporting its FY25 half-year result.
NAB FY25 half-year result
Here are some highlights from the six months to 31 March 2025:
- Cash earnings up 1% year over year to $3.58 billion
- Statutory net profit of $3.4 billion
- Net interest margin (NIM) stable at 1.70%
- Half-year dividend up 1.2% to $0.85 per share
- Credit impairment charge of $348 million, down 4% year over year
Let’s take a look at some of the drivers of the result.
What led to these HY25 numbers?
Compared to the second half of FY24, the business reported HY25 saw revenue increase 1.7% because of stronger markets and treasury income. However, excluding that, revenue was 1.1% lower because of a lower margin offset by loan volume growth.
NAB reported that its NIM – which tells investors about its lending profitability including the loan rate and the rate of savings accounts etc. – was flat at 1.7%. But, excluding a 3 basis point (0.03%) boost from markets a treasury, the underlying NIM fell 3 basis points (0.03%) because of “deposit impacts, higher wholesale funding costs and lending competition”.
Expenses increased by 1.4% mainly because of higher personnel and financial crime-related costs, along with increased technology spending. NAB said it partially offset that with productivity benefits and lower costs relating to the enforceable undertaking with AUSTRAC.
Looking at the cash earnings of individual divisions, business and private banking earnings grew 1.4% to $1.63 billion, personal banking earnings fell 6.8% to $576 million, corporate and institutional banking earnings rose 4.1% to $909 million and New Zealand Banking earnings jumped 12.5% to NZ$781 million.
One of the highlights of the update was its increasing share of deposits. NAB’s household deposits grew by 1.3x the speed of the overall banking system and business deposits rose by 1.6x of the pace of the overall banking system.
Arrears
Interestingly and disappointingly, NAB’s loan arrears have continued to rise, unlike Westpac Banking Corp (ASX: WBC) which saw a reduction.
The percentage of housing loans that were 30+ days overdue reached 1.87% at March 2025, up from 1.82% at September 2024. The percentage of housing loans that were in arrears by 90+ days reached 1.15% at March 2025, up from 1.08% at September 2024.
Is the NAB share price a buy?
It was good to see a slightly higher profit and dividend, but it wasn’t exactly inspiring. The bank said it’s optimistic about underlying growth for the Australia and New Zealand economies, and that it has strong balance sheet settings.
However, with potential further interest rate cuts on the cards (which could hurt the NIM and overall earnings), I wouldn’t describe NAB shares as a great buy today at the current valuation. There are other ASX dividend shares I’m attracted to more.
