NAB Profit Falls 13%: Is the Bank Still Worth Buying After the Results Miss?

National Australia Bank (ASX: NAB) shares came under pressure on Thursday, 5 November 2026, after the lender reported a 13.4% decline in FY26 cash earnings and a sharp increase in credit impairment charges.

The bank reported cash earnings of $6.14 billion for the financial year, down 13.4%. The result was affected by $949 million in after-tax one-off charges, largely associated with a change in the accounting treatment of software development costs.

However, the earnings decline was not the only concern for investors. NAB's credit impairment charges increased 86% to $1.55 billion, highlighting growing pressure from bad debts and a more challenging economic environment.

The results disappointed the market, with NAB shares falling 6.2% to $38.58 at noon on Thursday.

Despite the weaker headline earnings, the bank reported growth in lending, deposits and underlying revenue. This creates an important question for investors: is NAB still worth considering after its latest results?

NAB FY26 Results: Key Financial Highlights

NAB's FY26 financial results presented a mixed picture of its operating performance.

The key figures included:

• Cash earnings: $6.14 billion, down 13.4%.

• Underlying profit: $10.38 billion, down 5.4%.

• Cash earnings excluding one-off charges: $7.09 billion, broadly flat.

• Credit impairment charges: $1.55 billion, up 86%.

• Net interest margin: 1.80%, up 6 basis points.

• Full-year dividend: 170 cents per share, fully franked.

• Final dividend: 85 cents per share.

The results show that NAB's reported profitability faced pressure, although several underlying operating measures remained relatively stable.

Why Did NAB's Cash Earnings Fall 13.4%?

One of the biggest contributors to the decline was a $949 million after-tax one-off charge.

The expense was largely associated with a change in the bank's accounting policy for software development costs.

Under the revised treatment, software development costs are written down and immediately expensed rather than treated under the previous accounting approach.

This affected the reported cash earnings figure, bringing it down to $6.14 billion.

However, excluding the one-off charges, cash earnings stood at $7.09 billion, broadly flat compared with the previous year.

NAB also reported that underlying profit, excluding the large notable item announced at the half-year, increased 6.9%, while revenue grew 5.8%.

This distinction is important because the headline earnings decline does not fully reflect the performance of the bank's underlying operations.

Rising Bad Debts Are a Major Concern

While the accounting charge affected reported earnings, the increase in credit impairment charges presents a separate concern.

NAB's credit impairment charges rose 86% to $1.55 billion, exceeding Macquarie's forecast of $1.36 billion by 13.5%.

The majority of the increase came from individual customers, particularly business borrowers across the bank's corporate and business banking divisions.

The bank also added $403 million to forward-looking provisions.

NAB cited several economic risks contributing to its more cautious outlook, including:

• Higher inflation.

• Five cash rate rises.

• Rising living costs.

• Slowing economic growth.

• Declining house prices.

• Global uncertainty.

These developments could affect borrowers' ability to meet their financial commitments, potentially putting further pressure on the bank's credit quality.

For investors, the key question is whether the increase in bad debts represents a temporary challenge or the beginning of a more prolonged period of credit stress.

Is NAB's Core Banking Business Still Growing?

Despite the decline in headline cash earnings, NAB reported growth across several important operating divisions.

Its Business and Private Banking division increased lending balances by 10.5% and deposits by 6.1%.

Corporate and Institutional Banking also recorded lending growth of 9.0% and deposit growth of 5.5%.

In Personal Banking, deposits increased by 7.0%.

The bank also reported that the proportion of new Australian home loans originated through proprietary channels reached 53% in the second half.

These figures indicate that NAB continues to expand its lending and deposit operations despite challenging economic conditions.

Another positive development was the improvement in net interest margin, which increased 6 basis points to 1.80%.

Net interest margin measures the difference between the interest a bank earns on its lending and the interest it pays on its funding.

An improvement in this measure can support profitability, although the overall impact also depends on funding costs, lending volumes and credit quality.

What Does NAB's Dividend Mean for Investors?

NAB declared a final dividend of 85 cents per share, fully franked.

This brings the total FY26 dividend to 170 cents per share.

The full-year dividend matched Macquarie's forecast, providing some support for income-focused investors despite the weaker reported earnings.

However, a strong dividend does not automatically make a stock attractive.

Investors should also consider whether the bank can maintain its earnings, manage rising bad debts and support future shareholder distributions.

The bank's capital position is another important factor when assessing its ability to navigate a challenging operating environment.

What Is NAB's Outlook for FY27?

NAB enters FY27 with several economic challenges.

Higher inflation, rising living costs and a slowing economy could affect household confidence and business conditions.

The bank has also announced plans to simplify its operating model, including reducing its workforce by up to 2,500 roles by September 2027.

The changes are intended to reduce duplication, improve decision-making and direct investment towards areas that matter most to customers.

NAB CEO Andrew Irvine said the bank enters FY27 with good underlying momentum, clear strategic priorities and an established leadership team.

However, management also expects a tough year ahead.

Investors will therefore need to monitor the bank's credit quality, lending growth, margins and operating costs over the coming financial year.

Is NAB Still Worth Buying After the Results Miss?

NAB's FY26 results offer both positive and negative signals.

On the positive side, the bank reported growth in lending and deposits, an improvement in net interest margin and a fully franked annual dividend of 170 cents per share.

Its underlying cash earnings also appear more stable when the $949 million in one-off charges are excluded.

However, the 86% increase in credit impairment charges is difficult to overlook.

Higher bad debts could continue to weigh on profitability if economic conditions deteriorate further.

Investors should also consider NAB's valuation, dividend sustainability and ability to maintain margins before making an investment decision.

The Bottom Line

NAB's 13.4% decline in FY26 cash earnings initially looks concerning, but the impact of one-off charges provides important context.

The bank's underlying operations continue to show growth in several areas, while its fully franked dividend remains an important consideration for income-focused shareholders.

However, rising credit impairment charges and a challenging economic outlook create uncertainty around its FY27 earnings performance.

Whether NAB shares remain attractive will depend on how effectively the bank manages credit risks while maintaining lending growth, margins and shareholder distributions.