National Australia Bank Ltd (NAB) reported a 1 per cent rise in interim cash earnings to $3.58 billion for the six months to March 31, exceeding analyst forecasts of $3.47 billion.
Chief Executive Andrew Irvine emphasised a more selective approach to business lending, prioritising small and medium-sized enterprises (SMEs) and targeted high-end clients, amid tighter margins, competitive pressure, and global uncertainty.
“Not only are we the largest business bank in terms of lending, but we’re also now the largest business bank in terms of deposits. That’s really pleasing, and it also helps you manage your margin when more of your loans are funded by your own deposits, which has been a really strong focus for us,” Irvine told The Australian.
“We haven’t been chasing lower-value lending in this period and that’s why, at the top line, we’ve been a touch software in business lending (compared to broader system growth). We’re focused on the areas where we can get a good return for our efforts, and that’s in SME banking and in target clients at the top end of town,” he said.
Cash rate to drop
NAB forecasts a drop in the official cash rate to 2.6% by February 2026, down from 4.1%, which Irvine warned could fuel further house price increases unless housing supply is addressed.
“Economics 101 suggests that if supply isn’t growing and demand increases, prices go up. If interest rates come down around 100bps (this year), it’s likely that, in and of itself, is going to drive house prices even higher.
“So we may not get the outcome we want, which is getting more people into houses. The Australian dream is to own a home, and you want younger people to have a chance to do that. You want new Australians to have a chance to do that, and the only way we’re going to address it is to fix supply, and so we’ve got to have more conversations on that. Too much of the discourse on housing is on the demand side. We need more discourse and levers on supply side.”
The bank expects the Reserve Bank of Australia (RBA) to implement a 50 basis point rate cut this month, followed by three more cuts within the year.
Business and private banking earnings fell 0.7% year-on-year to $1.63 billion, while personal banking earnings rose 3.6% to $576 million but declined from the second half of 2024.
NAB’s net interest margin dropped to 1.7%, affected by deposit pricing, wholesale funding costs, and lending competition. Operating expenses increased 1.4% but are projected to remain below the 4.5% rise recorded in fiscal 2024.
The interim dividend was raised by 1 cent to 85 cents per share.