National Australia Bank cuts housing credit forecasts

National Australia Bank shares plummeted more than 5.2% on Monday after the bank predicted housing credit growth will slow sharply this year. The government's property tax changes have dampened home buyer activity, leading to a 15% decline in Australian home loan applications at NAB over the third quarter compared to the previous one.

The bank, which is Australia's third-largest home lender and top business lender, reported cash earnings of A$1.83 billion for the three months ended June 30, a 2% increase from the prior two quarters. NAB's shares fell by 5.2%, their biggest one-day decline since April of last year, and are now down 7.4% for the year. The bank expects housing credit demand to fall significantly in its 2027 financial year, starting in October, with total housing credit growth decreasing from about 7.5% to 2.5%.

CEO Andrew Irvine attributed the challenges to the Middle East conflict, higher domestic interest rates, and recent tax changes in the Federal Budget. NAB also predicted a potential 10% drop in house prices in Sydney and Melbourne this year, with modest growth of 1.0% in 2027. The bank's net interest margin for the quarter was 1.79%, and its common equity tier 1 ratio, a key measure of financial strength, fell to 11.93% in the third quarter from 12.14% the previous year.