Australian banks' credit risk rises amidst high debt, economic uncertainty

National Australia Bank reported an 8.1% decline in cash earnings.

Australian banks face heightened risk of rising credit losses as high household debt levels, elevated interest rates, and global economic uncertainties continue, according to S&P Global Ratings.

The National Australia Bank (NAB) reported an 8.1% decline in cash earnings for the fiscal year ending 30 September 2024, though its earnings remained stable half-on-half. S&P noted that stabilising domestic economic and competitive conditions could help NAB maintain its credit profile.

Despite the decline, NAB’s capital levels are projected to stay robust over the next two years, S&P said.

NAB's common equity tier 1 (CET1) ratio stands at 12.35%. Following a recent A$600 million share buyback– part of a larger A$1.5 billion buyback plan– its pro forma CET1 ratio will adjust to 12.21%, which remains above the bank’s target range of 11% to 11.5%.