National Australia Bank reported first-half cash earnings that fell short of market expectations, citing both a large accounting-related charge and an impairment linked to geopolitical stress. The results highlight tensions between resilient lending activity and rising downside risks to credit quality from the Middle East conflict.
Profit and notable charges
For the six months ended March 31, NAB recorded cash earnings of A$2.64 billion, missing the Visible Alpha consensus of A$2.93 billion and down from A$3.58 billion a year earlier. The group booked a pre-tax charge of A$1.35 billion - equivalent to A$949 million after tax - associated with a change to its software capitalisation policy. In addition, NAB recognised a credit impairment charge of A$706 million, which the bank attributed to stress related to the conflict between Iran and the U.S.
Underlying performance
Excluding the large notable items, NAB said cash earnings edged up to A$3.59 billion in the first half, with much of the improvement driven by robust growth in business lending volumes. Business lending grew by more than 10%, lifting six-month cash earnings for the business and private banking division by 12.3% to A$1.85 billion.
The bank's net interest margin, a key measure of lending profitability, rose by three basis points compared with the previous six months to 1.81% in the period ended March. These lending trends supported core earnings despite the drag from the one-off and impairment items.
Capital and dividend
NAB reported a common equity tier 1 (CET1) ratio of 11.65% in the first half, down from 12.01% a year earlier, a decline the bank said reflected the impact of market volatility. The board declared an interim dividend of 85 Australian cents per share, unchanged from the prior year.
Risk outlook
While the bank noted that underlying asset quality outcomes had generally improved in the first half of 1H26, it explicitly warned that the outlook is more uncertain owing to the Middle East conflict. NAB identified that conflict as a key source of downside risk to its underlying asset quality. The U.S.-Iran war, which erupted in late February, has disrupted global markets as concerns around oil supplies and heightened geopolitical risk have pushed energy prices higher.
Currency reference
The company disclosed the exchange rate context used in reporting: $1 = 1.3858 Australian dollars.
This report presents the bank's reported first-half financials, notable charges, segment performance and management's stated risks without adding external commentary.