NAB shares fall after flagging $705m hit in credit impairment charges
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More news: Shares in NAB fell in afternoon trade after the bank flagged $706 million in first-half credit impairment charges, citing continued market volatility from the ongoing Middle East conflict.
Shares had fallen 3.74% to $40.96 at 1:25pm AEST.
UBS analyst John Storey said that, given NAB’s exposure to SME and business banking, more cyclical operational performance is to be expected compared to its peers. He noted that NAB has entered this vulnerable period from a much stronger starting point than in prior corresponding periods.
UBS maintains a buy rating on NAB, with a price target of $50.50.
NAB flags $706m in first-half credit impairment charges
The news: Big four lender NAB has flagged $706 million in credit impairment charges for the first-half period, including a $300 million increase in forward-looking collective provisions, to reflect market volatility due to conflict in the Middle East.
The numbers: Of the collective provisions, NAB outlined a $201 million increase in forward-looking adjustments for potential stress which may emerge in sectors impacted by fuel supply and cost issues related to the war.
The ratio of collective provisions to credit risk weighted assets is expected to be 1.35% at March-end, up from 1.31% in December.
NAB said interest rate volatility and a weakening of the New Zealand dollar in the second quarter, together with the $300 million net increase in forward-looking collective provisions, has reduced its common equity tier 1 (CET1) ratio by around 20 basis points at 31 March.
The bank noted that due to ongoing uncertainty, it is “taking action to strengthen the capital position and balance sheet resilience”, including applying a 1.5% discount to its first-half dividend reinvestment plan and partially underwriting the plan.
These actions are expected to raise up to $1.8 billion and contribute around 40 basis points to the group’s CET1 ratio in the second half.
NAB currently expects to report a pro forma CET1 ratio at 31 March of greater than 12%, including the benefit of the discounted and partially underwritten DRP.
The lender has also updated its software capitalisation policy from the period ending 31 March to “align the group’s accounting policies with a rapidly evolving technology environment”.
NAB’s first-half results will include an accelerated amortisation charge of $1.347 billion, pre-tax, reported as a large notable item.
NAB, which is set to announce its half-year results on 4 May, confirmed its existing guidance for FY26 cash operating expense growth of less than 4.6%.
The sources: ASX, UBS analyst note
