National Australia Bank Limited (ASX: NAB) has released its 2025 half-year results, delivering a resilient performance despite ongoing economic headwinds. The bank posted a statutory net profit of $3.55 billion, representing a 12.8% year-on-year decline. Cash earnings, the bank’s preferred measure, also dropped by 12.8% to $3.55 billion. While the headline numbers are down, NAB highlighted operational strengths and disciplined cost management that helped support margins and capital buffers.
Key Financial Information from NAB 2025 Half-Year Results [NAB]
Revenue and Margin Pressure Evident
NAB’s revenue fell 3.1% to $9.1 billion compared to the prior corresponding period. This was driven by tighter net interest margins (NIM), which declined by 5 basis points to 1.72%. The contraction in NIM reflects intense competition in the lending market, higher deposit costs, and customers switching to lower-margin fixed-rate loans.
Despite these pressures, group lending rose 3.1%, underpinned by growth in business lending. CEO Andrew Irvine noted, “We are optimistic about the underlying growth outlook for the Australian and New Zealand economies. However, escalating global trade tensions are a key source of uncertainty. Against this backdrop, we have maintained strong balance sheet settings. Collective provisions represent 1.42% of credit risk weighted assets, our CET1 ratio sits at 12.01% and our FY25 term funding task is well progressed with over $20 billion raised in 1H25.”
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Operating Expenses and Efficiency
NAB kept a firm grip on expenses, with operating costs down 1.3% to $4.1 billion. This was attributed to productivity benefits and reduced remediation costs. However, when excluding one-off items, expenses were broadly flat, indicating ongoing pressure to manage costs amid a competitive banking environment.
The bank’s cost-to-income ratio edged up slightly to 45.3%, reflecting weaker income growth, but still compares favourably with domestic peers.
Asset Quality Remains Strong
Asset quality remains a bright spot in NAB’s results. The bank reported a credit impairment charge of $393 million, up from $393 million in the previous half, but still low by historical standards. The ratio of 10 basis points of gross loans and acceptances suggests sound credit management and a broadly stable economic environment.
Stage 3 loans (those at risk of default) increased slightly to 0.88% of gross loans, reflecting ongoing stress in certain sectors, particularly small businesses and commercial property. However, NAB maintained a conservative provisioning approach, with collective provisions of $4.2 billion.
Capital and Dividend
NAB continues to demonstrate capital strength, with a Common Equity Tier 1 (CET1) ratio of 12.0%, comfortably above APRA’s “unquestionably strong” benchmark of 10.25%. The bank declared a fully franked interim dividend of 84 cents per share, unchanged from the prior period, maintaining a payout ratio of 72%.
The stable dividend reflects management’s confidence in the bank’s balance sheet and earnings resilience. NAB has not announced any share buyback program at this stage, preferring to retain capital flexibility in an uncertain macroeconomic environment.
NAB Dividends Outlook Over Years [NAB]
Segment Performance
Business and Private Banking remained NAB’s largest profit contributor, although cash earnings in the segment fell 5.1% to $1.74 billion due to margin compression. The Personal Banking segment saw a 9.2% drop in cash earnings, while Corporate and Institutional Banking reported a decline of 7.6%.
New Zealand Banking delivered a small gain in cash earnings, up 2.1% in local currency terms, supported by stable net interest income and lower credit impairment charges. NAB’s investment in technology also continues to bear fruit, with more customers using digital channels and digital engagement metrics showing strong improvement.
CEO Transition
This result marks the first half-year report under new CEO Andrew Irvine, who replaced Ross McEwan earlier this year. Irvine emphasised a disciplined and customer-centric strategy moving forward. “Our focus is on delivering for customers, maintaining strong risk and capital settings, and investing in our long-term competitiveness,” he said.
He also acknowledged the broader economic uncertainties, including elevated inflation, interest rate volatility, and geopolitical risks, but expressed confidence in NAB’s ability to adapt and thrive.
Investor Outlook
As of the latest trading session, NAB shares reached $35.96, up $0.66 (1.87%) for the day. The bank has a market capitalisation of $108.10 billion with 3.06 billion shares on issue. Its 52-week trading range spans $31.13 to $41.68, indicating moderate volatility and resilience through economic cycles.
Performance Snapshot:
- 1 Week: +0.03%
- 1 Month: +6.71%
- YTD 2025: -3.07%
- 1 Year: +5.33%
- Compared to Sector (1yr): -12.83%
- Compared to ASX 200 (1yr): +0.90%
Despite underperforming the broader banking sector over the past year, NAB has outpaced the ASX 200 and demonstrated relative stability. The share price reflects a modest recovery from earlier 2025 lows, but still trails its 52-week high, suggesting upside potential if earnings stabilise and economic indicators improve.
With a strong capital position, consistent dividend yield, and disciplined cost control, NAB remains a favoured pick for income-oriented investors. However, pressure on margins and subdued economic growth are headwinds to earnings momentum. Investors should watch closely for signs of interest rate stabilisation, cost inflation control, and progress on NAB’s digital and SME lending strategies.
The current valuation suggests NAB is fairly priced given its performance outlook, but dividend reliability and balance sheet strength could offer defensive appeal in a choppy market environment.
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