NAB has experienced a slight – but not unexpected – decline in the overall quality of its loan books in the first half of its 2025 financial year.
The ratio of non-performing loans as a percentage of gross loans and acceptances increased 10 bps to 1.49 per cent, although at a slower pace than in the second half of 2024.
"The increase this year was mainly due to Business and Private Banking business lending, whereas Australian home lending arrears trends appear to be stabilising," Shaun Dooley, NAB's acting group chief financial officer, told analysts and investors yesterday.
"While the total NPL ratio remains dominated by "Default but not impaired" exposures, we have seen a further increase in impaired assets this period and also higher 'Watch' loans – both driven by business lending across corporate and institutional, and the business and private bank operations," Dooley said.
Dooley said NAB's loans book is performing as expected for this stage of the economic cycle.
"In the past six months – and not unexpectedly – the non-performing loan ratio for the business and private bank's lending portfolio has been increasing, and in the first half of 2025 rose 38 basis points, a similar pace to [2H24]," Dooley said.
"The higher NPL ratio was dominated by 'Default but not impaired' exposures, where we do not expect to incur actual losses."
Overall, though, NAB's credit impairment charges reduced over the half to $348 million, down $17 million from 2H24, representing 9 basis points of gross loans and acceptances.
The reduction, compared to 1H24, reflects a lower level of charges in business and private banking, partly offset by the impairment of a small number of customers in corporate and institutional.
Andrew Irvine, NAB's group chief executive officer, said there were no plans to rejig the group's provision charges.
"While the underlying outlook for the Australian and New Zealand economies is improving, elevated global trade tensions are a key source of uncertainty and downside risk," Irvine said.
"As such, we have maintained a prudent approach to provisioning with collective provisions representing 1.42 per cent of credit risk weighted assets and total provisions representing 1.67 per cent of CRWA."