National Australia Bank Ltd (ASX: NAB) shares are falling on Monday morning.
At the time of writing, the ASX 200 bank stock is down 1% to $39.36.
This follows the release of the big four bank's half-year results before the market open.
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NAB shares are falling on results day
Investors appear to be responding negatively to NAB's half-year results, which showed modest earnings growth.
For the six months ended 31 March, NAB reported a statutory net profit of $2.75 billion and cash earnings of $2.64 billion. However, cash earnings were impacted by a $949 million after-tax large notable item relating to a change in the bank's software capitalisation policy.
Excluding this large notable item, cash earnings were $3.59 billion, up 2.3% on the second half of FY 2025 and broadly flat compared to the prior corresponding period.
Its underlying profit grew at a strong rate of 6.4%. This was underpinned by a 3.1% increase in revenue compared with the second half of FY 2025 and a modest reduction in expenses (excluding the large notable item).
A key driver of this was its Business and Private Banking division, where cash earnings excluding large notable items rose 9.9% to $1.85 billion.
Dividend maintained
Income investors may be pleased to see NAB maintain its interim dividend.
The board has declared a fully franked interim dividend of 85 cents per share, which is in line with both the prior period and prior corresponding period.
This represents a cash dividend payout ratio of 72.5% when excluding large notable items, which remains broadly consistent with recent periods.
Balance sheet strengthened
NAB ended the half with a Common Equity Tier 1 capital ratio of 11.65%, down slightly from September 2025 but still above its target level.
The bank also reminded the market that its dividend reinvestment plan will include a 1.5% discount and be partially underwritten. Together, this is expected to raise approximately $1.8 billion and support a pro forma CET1 ratio of 12.05%.
This move appears to be designed to strengthen the bank's capital position at a time of heightened geopolitical and economic uncertainty.
Credit provisions rise
One area investors will be watching is credit quality.
NAB's credit impairment charge increased to $706 million, up from $485 million in the previous half. This included a $300 million increase in forward-looking provisions linked to potential stress from the Middle East conflict.
Despite this, NAB said underlying asset quality outcomes generally improved during the half.
Management commentary
NAB's CEO, Andrew Irvine, was pleased with the half. He said:
Continued disciplined execution of our strategy and ongoing momentum across our business is reflected in NAB's 1H26 operating performance. Changes to our software capitalisation policy this period, consistent with the rapidly changing technology environment, have lowered cash earnings by $949 million. Excluding this large notable item (LNI), cash earnings were 2.3% higher than 2H25 with underlying profit up 6.4% supported by strong growth of 5.4% in Business & Private Banking (B&PB).
We made further progress against our three key priorities of growing business banking, driving deposit growth and strengthening proprietary home lending in 1H26. Australian business lending rose 5.6% with market share gains in both SME and total business lending(1). Australian home lending drawdowns via proprietary channels improved from 41.4% in 2H25 to 47.7% in 1H26(2). Deposit balances in B&PB and Personal Banking (PB) increased 4.7% including 8.0% growth in transaction accounts (excluding offsets).
Irvine appears cautiously optimistic on the bank's outlook. He adds:
Geopolitical tensions have created a more volatile macro economic environment. We enter this period in good shape and actions taken in 1H26 to bolster our balance sheet will allow us to continue to grow and support customers. […]
We are well placed to navigate a period of increased volatility. We will continue to manage our business for the long term to deliver sustainable growth and attractive returns for shareholders.
