NAB shares fall as softer home lending overshadows Q3 earnings growth

National Australia Bank (NAB) shares experienced a significant drop of over 4% on Monday, despite the lender reporting higher third-quarter cash earnings and a sharp increase in statutory net profit. The Australia's leading business lender disclosed unaudited cash earnings rising by 2% to A$1.83 billion, while statutory net profit increased by 32% to A$1.81 billion.

The results were driven by lower credit impairment charges and continued volume growth. However, investors seemed more preoccupied with the state of the housing market. Australian home lending grew in tandem with the broader system, excluding the Advantedge runoff, but applications for home loans declined by 15% from the second quarter.

NAB cited a more uncertain environment for customers, citing the Middle East conflict, higher domestic interest rates, and recent tax changes in the Australian federal budget. The lender's shares closed at A$39.50, down 4.1% as of 01:23 GMT. During the quarter, Australian business lending saw a 2% increase, with a notable 4% growth in Business & Private Banking.

Total customer deposits also rose by 2%. Revenue grew by 2% from the first-half quarterly average, and underlying profit remained broadly stable. Net interest margin slightly decreased by 2 basis points to 1.79%, although it improved excluding impacts from the Markets & Treasury departments. NAB reassured that it remains well capitalized, boasting a Common Equity Tier 1 ratio of 11.93%, surpassing its operating target of over 11.25%.

The bank reiterated its FY2026 objective to achieve more than A$450 million in productivity savings and anticipates operating expense growth to stay below the 4.6% increase observed in FY2025.