April 20 - National Australia Bank (NAB), which is described as Australia’s largest business lender, said on Monday it now expects credit impairment charges of A$706 million in the first half of the financial year, reflecting rising concern that the Iran war is disrupting the global economy and financial markets.
The bank warned that the probability of a so-called Australian downside economic scenario has risen as a result of the conflict in the Middle East, prompting management to predict a higher level of bad debts than previously expected.
Market reaction was immediate. NAB shares fell by as much as 3.8% on Monday, while the S&P/ASX200 index was down 0.24% in early trade. Within the broader market, the ASX200 financials index lost 0.67%, with NAB cited as a principal drag.
The A$706 million of impairment provisions is up from A$348 million a year earlier and from A$485 million recorded in the second half of the prior year. NAB said it will further boost provisioning by A$300 million in the first half of 2026, the period ending in March, and will report those results on May 1.
Of the A$300 million increase, A$201 million is being allocated to new provisions for transport and agriculture borrowers, sectors the bank says are facing tighter fuel and diesel supply and a prospect of higher prices persisting for longer. NAB also disclosed that it had increased provisioning for construction and commercial real estate borrowers.
The lender said that second-quarter interest-rate volatility, a weaker New Zealand dollar and the additional provisioning would together reduce the group's common equity tier 1 (CET1) capital ratio by roughly 20 basis points as of March 31.
To help shore up its balance sheet, NAB said it intends to apply a 1.5% discount to its first-half dividend reinvestment plan, a move intended to raise up to A$1.8 billion.
NAB is the second major Australian bank to raise credit provisions citing tensions in the Middle East. Westpac last week had said that credit impairment charges would increase as it judged higher inflation and sustained elevated interest rates would make operations more challenging for some of its clients.
Separately, NAB said its first-half result will include an accelerated amortisation charge of A$949 million after tax, stemming from changes to its software capitalisation policy.
Currency note: $1 = 1.4047 Australian dollars.