NAB earnings outlook tempered by higher costs and loan competition

The bank does have low levels of problem loans and a strong funding profile, Moody’s said.

National Australia Bank (NAB) has strong asset quality with low levels of problem loans, and a strong funding profile, said Moody’s Ratings. However, earnings growth will remain a challenge for 2026 as competitive pressure on lending and deposits— alongside rising operating and investment costs— will limit upside.

The Australian lender’s non-performing loans (NPL) ratio was 1.5% at September 2025, and it has an asset quality profile underpinned by its low-risk residential mortgage lending portfolio.

Its Australian housing portfolio impaired and 90-day past due represent just 1.13% of its portfolio as of September 2025.

“Whilst residential mortgage arrears had been on the rise up until March 2025, they have since moderated in the 6-months to September 2025 and we expect asset quality metrics will stabilize at around current levels with lower interest rates and low unemployment supporting the asset quality outlook,” Moody’s said in its ratings report of the bank on 20 November 2025, where it affirmed NAB’s Aa2 local and foreign currency senior unsecured ratings, and P-1 local and foreign currency short-term issuer ratings.

However, non-residential mortgage performance has weakened and been largely driven by agricultural exposures, which account for 33% of the increase in non-performing exposures.

NAB maintains loan loss reserves totaling A$6.2b.

Its funding profile, meanwhile, is supported by a stable deposit based and term wholesale funding, according to Moody’s.

NAB's weighted stable deposits represent 20% of its weighted available stable funding, although this is below its major bank peer group average of 26%.

The group also raised A$36b of term wholesale funding in FY2025, compared to A$26b of maturities.

“The group maintains access to all major funding markets and is able to issue in multiple currencies and products. Reliance on short-term wholesale funding is low, representing only 15% of total funding sources, including deposits,” Moody’s wrote.

Liquidity profile is said to be strong.

“NAB's liquidity profile is supported by the stability of its deposit base which results in very low modelled outflows. Eligible high quality liquid assets for regulatory purposes in Australia are of very high quality and exhibit very strong liquidity characteristics,” Moody’s said.

Strong credit growth and a benign credit environment could provide a counterbalance to the factors that affect earnings growth. Moody’s expects NAB's return on assets for FY26 will be slightly down to broadly stable.