The National Australia Bank Ltd (ASX: NAB) share price is up 2% after the business reported its FY25 third quarter and admitted to significant payroll remediation.
Payroll remediation
NAB said its FY25 operating expenses are expected to be approximately 4.5% higher than FY24. This includes costs of $130 million that is expected to be incurred in FY25, relating to the payroll review and remediation of payroll issues.
This payroll review and remediation is ongoing and the total cost of it remains uncertain.
NAB said it has been investing in its systems, processes and support including new HR resources and payroll platform. This follows a payroll review which started in 2019, leading to costs of $250 million between FY20 to FY22.
The ongoing review and investment, as well as the work undertaken to transition to a new 2024 enterprise agreement has helped identify further payroll issues. NAB initiated a broader review into payroll-related benefits under current, as well as certain historical agreements.
The NAB executive for people and culture, Sarah White, said:
Paying our colleagues correctly is an absolute priority. We are sorry and apologise to our colleagues that this has happened and have commenced remediating those impacted.
NAB FY25 third quarter
The bank reported how it performed in the three months to June 2025. It reported $1.66 billion of statutory net profit.
The ASX bank share revealed $1.77 billion, down 1% compared to the quarterly average of the FY25 first half. This was flat compared to the third quarter of FY24.
NAB reported 2% underlying profit growth compared to the quarterly average of the FY25 first half, or 4% growth year on year.
Revenue grew by 3%, or 4% excluding markets and treasury income. This reflected higher margins and volume growth.
Expenses grew 3%, mainly because of payroll costs and increased technology spending. This was partly offset by productivity benefits.
Its credit impairment charge was $254 million, up from $81 million in the second quarter of FY25 and up from $118 million in the third quarter of FY24. The bank said its Australian mortgage portfolio is seeing “flattening arrears”. However, the ratio of non-performing exposures to total loans increased by 5 basis points (0.05%) from March 2025, to 1.54%.
Net interest margin
A bank’s net interest margin (NIM) tells investors how much profit it’s making on its lending, with both the loan rate and the cost (such as savings account rates) combining into a net interest margin (NIM).
NAB said its NIM increased by 8 basis points (0.08%). Excluding markets & treasury and the impact of “lower volumes of liquid assets”, NIM rose 4 basis points (0.04%), “primarily benefiting from higher earnings on replicating portfolios together with lower short-term funding costs.”
Final thoughts on the NAB share price
Investors seem to like what NAB revealed – the underlying profit growth is a good sign.
If NAB’s loan book can continue growing, as well as margins stay resilient and arrears and improving, that’s a good sign. I wouldn’t want to buy it today with how slow its earnings growth rate is and the level of competition.
I’m seeing plenty of ASX dividend shares that could be a better buy.
