The National Australia Bank Ltd (ASX: NAB) share price is in focus after reporting its FY26 result.
NAB is one of the largest ASX bank shares, with a focus on business banking.
FY26 result
The ASX bank share revealed how it performed in the 12 months to 30 September 2o26. Here are some of the highlights:
- Net operating income grew 5.8% to $22 billion
- Regular operating expenses increased 4.5% to $10.3 billion
- Large notable expense items of $1.35 billion
- Credit impairment charge soared 85.7% to $1.55 billion
- Cash earnings excluding notable items were flat of $7.09 billion
- Cash earnings fell 13.4% to $6.1 billion
- Statutory net profit fell 9.1% to $6.1 billion
- Final dividend per share of $0.85, flat
- Full-year dividend per share of $1.70, flat
What happened?
NAB said that its gross loans and advances (GLA) increased by 5.2% and deposits grew by 5.2%.
Excluding the translation impact of a lower New Zealand dollar, lending grew 6.5% and deposits increased 6.2%.
In terms of the divisions (excluding large notable items), business and private banking grew cash earnings by 10.7% to $3.7 billion, personal banking cash increased 8.7% to $1.36 billion, corporate and institutional banking cash earnings fell 6.1% to $1.74 billion and New Zealand banking cash earnings declined 7% to $1.38 billion.
In terms of its lending profitability – as measured by the net interest margin (NIM), including the loan rate and savings account rates – the NIM increased by 6 basis points (0.06%) to 1.8%. Excluding a 3 basis point (0.03%) benefit from markets & treasury and lower liquid assets, NIM rose 3 basis points (0.03%).
NIM rose thanks to higher earnings on deposit and capital replicating portfolios and a small benefit from lower funding costs, partially offset by lending competition.
The key reason for the decline of the profit was the increase in expenses, with both impairment charges and large notable items.
A big increase of notable items and credit impairment charges
Credit impairment charges broke down to specific charges of $1.08 billion (specific loans from certain borrowers) and a $464 million increase in collective provision charges because of a “challenging economic outlook”, as well as loan volume growth. Credit impairment charges were 0.19% of total loans in FY26, up from 0.11% in FY25.
After looking at its software capitalisation policy, NAB decided to reduce the useful life of its capitalised software assets, change the nature of its assets capitalised and increase the threshold at which software is to be capitalised from $5 million to $20 million.
If a business spends a significant sum on software, it can split that cost over a number of number of years. If NAB says it’ll use that software for 10 years (useful life), the cost is split over those 10 years. NAB decided to accelerate its amortisation charge for software, leading to a $1.35 billion charge.
Final thoughts on the NAB share price
NAB is seeing a slowing Australian economy, with expectations of real GDP growth of 1.4% in 2026 and just 1% in 2027.
The bank expects the umemployment rate to rise to around 5.5% by early 2028 before stabilising. NAB thinks the lag effects of rate rises will see the RBA hold interest rates at 4.85% for a while.
NAB also noted that the decline of the housing market “poses some additional downside risk to growth”.
Overall, I thought NAB’s underlying performance was solid amid difficult economic conditions. But, how much is a business worth if its profit isn’t rising? The rising rate environment increases risks of more loans going unpaid, which would be a headwind for earnings.
If I were a shareholder, the maintained dividend is satisfactory, but I’d want to see signs of growth in the longer-term. There are other ASX dividend shares I’d rather buy.
