National Australia Bank Limited

Good morning, and thank you for joining us today for NAB's Half Year 2026 results. I'm Sally Mihell, the Head of Investor Relations.

I would like to acknowledge the traditional owners of the land from which I join you today, the Gadigal peoples of the Eora Nation. I'd like to pay respect to the elders past and present and to the elders of the traditional lands from which you join us.

Presenting today will be Andrew Irvine, our Group CEO; and Inder Singh, our Group CFO. We are also joined in the room by members of NAB's executive team.

Following the presentations, there will be an opportunity for analysts and investors to ask questions. I'll now hand to Andrew.

Thank you, Sally, and good morning, everyone. I'd also like to welcome Inder, who is presenting his first set of results for NAB.

NAB's half year 2026 results benefited from good momentum across our business, supported by stable margins. We also benefited this half from strong broad-based credit growth in a supportive economic environment.

The outbreak of conflict in the Middle East have created more volatile environment, which we do expect to continue for some time. In light of this, we have improved the strength and resilience of our balance sheet to support our customers.

Our customer-centric strategy becomes even more important in the current environment, and we continue to execute this strategy with both focus and discipline. This is helping us deliver better customer experiences, which in turn drives improved customer advocacy.

To achieve our ambition to be the most customer-centric company in Australia and New Zealand, we must continue to modernize our technology to build a simple, fast and resilient bank. On this, we are making good progress with more to come.

We have 3 business priorities, which aim to deliver stronger returns over time, growing business banking, driving deposit growth and strengthening proprietary home lending. Again, we have continued to make good progress against each of these priorities, and I will discuss them in more detail shortly.

Looking ahead, while the near-term outlook is more challenging, we are well positioned to navigate this uncertainty with stronger balance sheet settings and good underlying momentum across our business. Cash earnings this half were impacted by changes to our software capitalization policy to reflect the rapidly changing technology environment.

Excluding the impact of this large notable item, our cash earnings increased 2.3%. This was mainly driven by a 6.4% improvement in underlying profit ex notables, offset by higher credit impairment charges.

Revenue growth of 3.1% reflects stronger markets and treasury income and volume growth. Total costs, excluding the impact of the notable item were down slightly.

Our cash return on equity, excluding the impact of the large notable item this half was 11.6%. This is slightly higher than fiscal year '25.

We have declared an interim dividend of $0.85, and this represents 72.5% of cash earnings, excluding notable items, which is in line with our target payout policy of between 65% and 75%. Disciplined execution by each of our divisions has contributed to our strong underlying performance in the half.

Business and Private Banking has had a very strong half with a 5.4% increase in underlying profit. The business has good momentum in lending and deposits with a stable margin outcome.

I'm particularly pleased with the 10.8% growth in transaction account balances, which reflects our consistent focus on deepening customer relationships. This performance is a strong demonstration of the quality of our business in Private Bank in a very competitive environment.

Corporate and Institutional Banking delivered underlying profit growth of 1.7%. A disciplined approach to both lending and deposits has helped deliver a 15.2% return on equity.

Business credit growth this half was 6.9%, reflecting strong system growth together with good momentum in corporate lending and higher customer drawdowns in the month of March. Personal Banking has also had a very good half with underlying profit of 3.7%.

The focus on strengthening proprietary home lending and growing deposits whilst managing margins has been a key driver, and I'll talk more about these shortly. Finally, in New Zealand, BNZ delivered flat underlying profits in what is a very challenging economic environment.

Our continued focus on growing personal deposits has supported good market share growth this half. The ongoing conflict in the Middle East is challenging customers through both higher fuel costs and supply disruptions.

These issues, together with inflationary pressures and higher interest rates are likely to create real cash flow stress for some customers. While the vast majority of our customers are well positioned to manage these impacts, some will need further support.

At our heart, NAB is a relationship bank. Our relationships with customers are particularly important in these times, and our business bankers are on the front foot contacting customers to discuss their circumstances.

Support provided includes increased limits to working capital facilities and overdrafts to manage liquidity issues. We have also provided some zero interest loans to customers as part of the government's economic resilience program.

Consumer sentiment has deteriorated sharply. However, overall, our retail customers enter this period with strong buffers.

Across our home loan book, offset and redraw balances have grown by 9% in the last 12 months. In addition, 80% of our customers did not reduce their home loan repayments in 2025 when cash rates fell by 50 basis points.

This will help those customers absorb an increase in interest rates from here. In light of the more challenging environment and the ongoing volatility, we have taken proactive steps to increase the resilience of our balance sheet settings.

The March common equity Tier 1 capital ratio of 11.65% is modestly lower over the half, reflecting both strong volume growth and market volatility impacts. To further strengthen capital, a 1.5% discount will be applied to our first half dividend reinvestment plan, and we expect to partially underwrite the DRP participation.

These actions will raise a total of approximately $1.8 billion and increase our group CET1 ratio by approximately 40 basis points to a pro forma ratio of 12.05%. Forward-looking collective provisions have also been increased by $300 million to a total of $1.93 billion.

This includes an increase in our economic adjustment as well as increased overlays in sectors more likely to be impacted by fuel supply and fuel cost issues. Our total provisioning to credit risk-weighted assets has increased to 1.6% and collective provisioning to credit risk-weighted assets has increased to 1.35%.

Liquidity and funding metrics remain well above regulatory minimums. The duration and intensity of the current disruption to liquid fuels markets and associated impact on the economy remain highly uncertain.

I'm confident the actions we've taken to improve the strength and resilience of our balance sheet will better enable us to continue to deliver the strategic priorities while supporting our customers through this more challenging period. The next slide outlines our strategy based on our ambition to be the most customer-centric company in Australia and New Zealand.

To execute this strategy, we are being disciplined and consistent in our focus on doing a few things well at both scale and at speed to power exceptional customer experiences. Our ambition to improve customer advocacy is anchored in a core belief that this will deliver deeper customer relationships together with improved retention and referrals.

This, in turn, should lead to higher growth and sustainable returns over time. NAB customer voices is the foundation of our strategic focus on customers.

This program, which we have been progressively rolling out over the last 18 months, enables us to more systematically measure, capture and respond to customer feedback. We continue to see the benefits, including significantly reducing the time required to open a simple business transaction account.

While there is more work to do, these improvements will help support our strategic focus on growing our core deposits. I'm very pleased to say that the progress to date has been recognized with NAB being awarded the Roy Morgan Customer Satisfaction Award for the Major Bank of the Year in 2025.

To put this in context, the last time NAB won this award was in 2012. This is a tremendous achievement, which recognizes the efforts of all our colleagues to improve customer experiences.

In addition, we now have positive NPS across all our 4 segments for the very first time. Our medium and large business NPS has improved by 16 points over 12 months and is ranked equal first of the major banks.

Over the same period, both mass consumer and micro and small business improved by 5 points with NAB now ranked equal second. Six months ago, you'll remember, I highlighted the focus on improving NPS in high net worth and mass affluent.

Here, too, our NPS has improved by 14 points, and our ranking has moved from fourth to third. The mass affluent segment and our premier banking strategy remains a key focus in our Personal Banking division.

And in this segment, we are now ranked second. While we certainly have more to do, our strategic focus on customer advocacy is working and can be a key differentiator for our bank.

Becoming a simpler, faster and more resilient bank is an ongoing journey and is embedded in how we run NAB. Simplifying the bank is key to our transformation.

This means reducing the number of products we offer, eliminating duplication and simplifying our processes. Since fiscal '22, we have cut the number of products we have by 27% with an ambition to get this down by 50%.

Being faster means improving the speed of delivery to customers by improving the productivity of bankers and support teams. This will increasingly be enabled through the use of AI to support routine tasks and allow colleagues to focus on higher-value work and to improve products and systems.

Improved resilience is also being delivered through the continued modernization of our core technology programs. The progressive migration to modern cloud-based platforms and decommissioning of legacy systems will continue to keep our customers safe and improve the availability of our services.

By becoming simpler, faster and more resilient, we aim to deliver stronger operating leverage, simple real-time banking that our customers love, lower operational risk and sustainable returns to shareholders over time. Upgrades to our bank's technology infrastructure foundations are now largely complete.

This includes multi-cloud infrastructure and the build and migration to a modern data platform. The next phase is the progressive modernization of our core product and servicing platforms, and this work is now well underway.

This slide highlights 2 of these platforms, our real-time payments platform and our transaction switch. In the first half, we completed the migration of all payments to our cloud-based real-time payments engine.

A modern payments platform has been key to the development of innovative payment solutions such as Amazon PayTo. Our transaction switch processes 15 million card and acquiring transactions every day across a range of channels.

A new transaction switch has now been installed in the cloud, and we have commenced building the capability to enable card processing and authorization. The migration of all credit and debit card transactions is expected to be completed in FY '27 with merchant acquiring to follow.

Our new Group Executive Digital Data and AI, Pete Steel, joined us in November, and Pete's deep experience is helping us prioritize where we invest in a rapidly changing technology environment. AI opportunities, including investments to date are broadly aligned to 3 strategic outcomes.

Growth opportunities will be supported by banker AI and customer AI solutions that will help drive and deliver more personalized services to our customers at both scale and enable our bankers to spend more time with our customers. Productivity opportunities will be supported by AI tools that can undertake routine tasks and increase the speed of delivery.

We have already rolled out AI tools to over 7,000 software engineers, which has, in turn, helped improve our change cycle delivery time and significantly increased developer productivity. We are also providing colleagues with access to AI tools to help them build the skills they will need in the future.

As this technology evolves quickly, it is important we embed the appropriate risk controls and governance frameworks to keep our customer data safe and ensure transparency of any AI decisions that are taken. NAB has 3 clear business priorities, which will help drive stronger sustainable returns.

The first is continued growth in business banking. Our aim is to be the clear market leader in business and private banking and to pursue disciplined growth in corporate and institutional banking.

The second is to continue to drive deposit growth with a focus on at-call transaction accounts. We are investing in innovative payment solutions for business and improved propositions for our target retail segments, including mass affluent and youth.

And the third is to strengthen our proprietary home lending. Here, we've implemented a number of initiatives to help grow the share of lending through our proprietary channels.

This will help manage margins and improve returns on our home lending portfolio. I will now speak to each of these priorities in more detail.

We are proud to support Australian businesses through our 2 business banking divisions, which combined make us the largest business lender in Australia. We have a 22% share of total business lending and a 28% share of lending to small- and medium-sized businesses.

Sound underlying business activity has supported strong business credit growth at a system level over the 12 months to March. As the largest business lender in Australia, we've continued to see good opportunities to grow.

Total business lending GLAs across both Business and Private Banking and Corporate and Institutional Banking increased by 11.5% in the 12 months to March to $306 billion. This is our strongest annual growth in 3 years and was supported by above-system lending growth in Australian business lending.

Business and Private Banking is the clear market leader in SME banking. This is NAB's heartland, and we know it well.

Our relationship-led approach increasingly enabled by digital, data and analytics capabilities continues to deliver good growth, and our pipeline remains strong. A focus on digitizing our customers' simple needs and removing work from our bankers is allowing bankers to spend more time with our customers.

This includes the continued deployment and development of our business lending platform with over 80% of lending applications in the first half submitted digitally. Competition in this segment has undoubtedly increased, but our scale, our deep expertise and the quality of our bankers enables us to compete from a position of strength.

In recent halves, despite strong competitive intensity, we have consistently grown business lending at above system rates while maintaining a stable divisional margin. A holistic approach to retaining high-performing bankers has helped keep turnover rates low.

Turning to our second priority of driving deposit growth. We continue to see strong growth in transaction and at-call accounts across both our Personal and Business Banking divisions.

Over the first half, Business and Private Banking and Personal Banking grew at-call deposit account balances by $14 billion, but which exceeded the growth in lending balances across these divisions. In Personal Banking, our investment in branch transformations and increasing engagement with customers has supported a 30% increase in new transaction account openings over the last 2 years.

In Business and Private Banking, a continued focus on deepening customer relationships and investments to streamline account opening processes has in turn supported a 31% increase in new transaction account openings over 2 years. The good growth in at-call deposits across the group this half has also meant we had correspondingly less appetite for larger term deposits.

This is reflected in the decline in total deposits in our Corporate and Institutional Banking division. NAB's home lending strategy aims to serve our customers well in the channel of their choice through the delivery of a seamless customer and broker experience.

A focus on strengthening our proprietary franchise has seen us grow our share of drawdowns by proprietary channels from 41.4% to 47.7% in the first half. And in the month of March, 50% of our drawdowns were through proprietary channels, a key milestone for our bank.

This progress has been supported by investments to improve banker productivity, including an increasing contribution from new bankers appointed in FY '25 to uplift capability. Having a strong and growing proprietary home lending business also means we can adopt a more targeted approach to broker distribution.

Brokers are an important distribution channel, and we are deepening relationships with value brokers to drive growth in priority segments. The successful execution of this strategy is delivering above system growth with improved home lending returns.

I'll now pass to Inder, who will take you through the financial results in more detail.

Great. Well, thank you, Andrew, and good morning all.

I'll focus on our financial performance as measured on a half-on-half basis compared to the period ending September '25. And to give you the best view of underlying trends, I will exclude the impact of the large notable item that we booked in the first half of 2026.

Slide 22 provides an overview of our earnings performance. Underlying profit rose 6.4%.

Revenue was higher, boosted by improved markets and treasury income and costs were slightly lower. Cash earnings grew 2.3% with underlying profit growth partly offset by higher credit impairment charges.

We referenced these higher credit charges in our pre-announcement, and they include a $300 million top-up to forward-looking provisions to reflect potential downside risk from the Middle East conflict. Statutory profit declined 18%, primarily as a result of the large notable item, partly offset by the gain on disposal of our remaining 20% stake in MLC Life.

Before we get into operating trends, I will provide some additional detail on the large notable item. This is set out on Slide 23.

As Andrew mentioned, we have implemented changes to our software capitalization policy to more closely align to an environment of rapid technological change. This has involved a reduction in the useful life of capitalized software assets and an increase in the capitalization threshold from $5 million to $20 million.

There has also been a change in the nature of assets capitalized. For example, we will no longer capitalize certain risk and regulatory spend.

These changes have resulted in a one-off accelerated amortization charge of $1.35 billion, which has been booked through the operating expense line in the first half. These changes are expected to also have impacts moving forward.

Firstly, the one-off accelerated amortization charge reduces our software capitalization balance by $1.35 billion, resulting in lower associated amortization charges going forward. Secondly, the remaining software capitalization balance of $2.2 billion will be amortized over a shorter period.

These 2 impacts are expected to be broadly offsetting in the second half of 2026. Finally, moving forward, a higher proportion of investment spend will be expensed with the OpEx ratio forecast to be approximately 50% in the second half of 2026.

Following these changes, we would expect additions to our capitalized software balance to be more closely aligned to amortization over time. Turning now to Slide 24.

Revenue rose 3.1%, mainly reflecting volume growth and a strong markets and treasury outcome. The depreciation of the New Zealand dollar had a negative $81 million impact on half-on-half revenue growth.

Markets and Treasury income increased $147 million over the first half. The key driver here was NAB risk management income, which benefited from improved outcomes in our treasury liquids portfolio, specifically the non-repeat of the realized losses on bonds that we experienced in the second half of 2025.

Customer risk management income also rose over the half, driven by some larger deals in C&IB. The revenue impact of a more broad-based increase in customer hedging activity was relatively limited due to the shorter average tenor of these trades.

Excluding Markets and Treasury, revenue rose 1.8%, primarily driven by volume growth, which contributed $167 million. As Andrew mentioned, this was another period of strong lending performance with growth aligned to our strategic priorities.

We saw good growth across our business banking franchises of B&PB and C&IB, along with housing growth supported by improved proprietary home lending flows. Margins were broadly stable, and I'll discuss these in more detail shortly.

Fees and commissions rose $16 million, benefiting from higher capital markets fees. Moving to Slide 25.

Net interest margin increased 3 basis points over the half. Excluding Markets and Treasury and the benefit of lower liquids, both of which are largely revenue neutral, NIM was stable this half with lower lending margins, mostly offset by higher earnings on our deposit replicating portfolio.

Lending margin reduced by 4 basis points. Within this, Australian home lending contributed 2 basis points to margin compression with half of that related to competitive pressures, and this trend is broadly in line with prior periods.

The timing difference between cash -- changes in cash rates and customer lending rates added a further 2 basis points of compression as we move from the benefit of 2 cash rate reductions in the prior half to a drag from 2 cash rate increases in the current half. This compression was partly offset by small positive impacts.

Australian business lending contributed 2 basis points to NIM compression with 1 basis point each from B&PB and C&IB. In B&PB, this impact reflects a fairly consistent level of competition with prior periods.

In C&IB, we have seen a pickup in competition and also a small change in our business mix. Funding costs were neutral this period with fairly stable spreads.

Deposits added 1 basis point to NIM, reflecting a series of small movements, which I'll walk through in turn. Firstly, mix contributed 1 basis point with stronger relative growth in lower cost transaction account balances over the period and a lower proportion of savings accounts earning bonus rates due to product refinements in ubank.

Secondly, deposit costs contributed a benefit this period of 1 basis point related to TDs. And lastly, we saw a 1 basis point drag related to the $5 billion increase in the size of our deposit replicating portfolio, which reduced the level of unhedged low-rate deposit balances.

It is important to note that this impact was largely offset by a higher earned benefit from the replicating portfolio as shown in the next block on this chart. The 3 basis point replicating portfolio benefit to NIM shown on the chart relates entirely to our 5-year deposit hedge.

This benefit was higher than our original guidance of 2 basis points with the extra basis point driven by the $5 billion top-up to the hedge I referenced earlier. Turning to some considerations for NIM in the second half.

Replicating portfolio returns are estimated at approximately 5 basis points. This is based on swap rates as at March 2026.

This increase in contribution from the first half reflects the full period impact of the $5 billion top-up to our deposit hedge plus higher swap rates impacting both deposit and capital hedges. This is a key area through which we are seeing the benefit from the rising rate environment.

Our strong deposit growth this period has reduced our sensitivity to changes in the Bills/OIS spread. An 8 basis point move in this spread is now equivalent to a 1 basis point impact on NIM.

Now moving to Slide 26. Operating expenses declined 0.5% over the period, excluding the large notable item.

This includes a $38 million benefit relating to the depreciation of the New Zealand dollar. Salary-related growth was $58 million.

The majority of this reflects the impact of pay rises from 1 January under the Australian enterprise agreement. Volume-related costs rose $52 million.

The key driver was additional bankers across all of our customer-facing divisions, with the largest uplift in Personal Banking, including increases as part of our strategy to strengthen proprietary home lending. Technology and investment spend rose $51 million.

The main drivers were higher technology spend related to cybersecurity and fraud prevention, increased cloud consumption, technology modernization and higher software and data costs. Investment spend was modestly lower, consistent with the usual seasonal trends between half years.

Productivity savings were $199 million, achieved through continued process improvement and simplification, operational and technology efficiencies and changes in the composition of our workforce. Other costs were up $16 million this half with a number of moving parts.

Key items included lower remediation costs, offset by higher performance-based compensation. Looking ahead, our considerations for FY '26 OpEx remain largely unchanged.

We expect year-on-year cost growth to be below the prior year comparative of 4.6%. Investment spend is expected to be approximately $1.8 billion with around 50% of second half spend expensed through the P&L.

This reflects our changed software capitalization policy. Depreciation and amortization is expected to be higher year-on-year, reflecting the timing of asset deployments.

Payroll review and remediation remains ongoing, and we note that $7 million of additional charges were booked in the first half of 2026. We continue to target productivity savings of greater than $450 million for the full financial year.

Now turning to asset quality trends on Slide 27. We entered the 2026 financial year on the back of several quarters of improving Australian economic trends.

Cash rates were declining, normal GDP was rising to around trend levels and unemployment remained low. However, with an absence of productivity improvements, it became evident in the second quarter that the economy was hitting capacity constraints with building inflationary pressures.

This prompted the Reserve Bank to tighten cash rates in February and March with an expectation of further cash rate increases and slowing activity. Then in early March, an escalation of the Middle East conflict resulted in a sudden and sharp increase in fuel costs, some supply challenges and a heightened level of uncertainty and market volatility.

Against this backdrop and with the typical lags we see between a change in economic conditions and the performance of our book, it wasn't surprising to see improved underlying asset quality outcomes in the first quarter of 2026. The default but not impaired ratio declined 8 basis points, supported by broad-based improvements across both our Australian mortgages and B&PB business lending portfolios.

However, as we move through the second quarter, these improving trends started to moderate. And whilst Q2 represents only one data point, we are monitoring this very closely.

As you're aware, the impaired asset ratio can be lumpy, and we have historically seen this ratio increase towards the later stages of an asset quality cycle. The 4 basis point increase this half was primarily driven by a small number of C&IB customers.

This was similar to what we saw in the second half of 2025. It is very difficult to forecast half-on-half movements.

But given the economic outlook, this impaired asset ratio could remain elevated over the coming months. The credit impairment charge for the first half was $706 million.

This equates to 18 basis points of gross loans and advances. This was $221 million higher than the second half of 2025, reflecting the $300 million top-up to forward-looking provisions, partly offset by lower individual charges and a write-back in the underlying collective provision.

IAP of $541 million included broadly stable charges for unsecured personal lending, modestly lower charges for B&PB business lending in New Zealand and higher charges in C&IB related to single name exposures. The underlying collective write-backs of $135 million were primarily driven by the release of provisions held for customers transferred to individually assessed, ratings upgrades for a small number of C&IB customers and data refinements, partially offset by lending growth.

The $300 million top-up to forward-looking provisions reflects increased stress in the outlook to the Middle East conflict, which I'll discuss in more detail. Turning now to Slide 28.

B&PB business lending asset quality trends are broadly consistent with the group profile I discussed on the prior slide, showing an improvement through the first quarter, but stabilizing in the second quarter. This has seen B&PB's business lending NPL ratio declined 22 basis points over the half with stable to improving trends across most sectors.

While our book is well diversified and highly secured, there is clearly downside risk to asset quality over the coming months. As Andrew highlighted earlier, our large network of relationship bankers is proactively reaching out to customers to understand the impact of the Middle East conflict on their businesses and discuss support options.

During these uncertain and challenging times, our scale and our long history of banking SME customers is really important. We have worked through many cycles, and we know this business and our customers well.

I'll now turn to provisioning on Slide 29. Total provisions increased $221 million over the first half and now represent 1.7x our base case scenario and equate to 1.68% of credit risk-weighted assets.

Individually assessed provisions have increased $91 million to $1.3 billion, reflecting new and increased provisions related to C&IB customers, partly offset by write-offs in B&PB. Collective provisions increased $130 million to 1.35% of credit risk-weighted assets.

Forward-looking collective provisions rose $300 million to reflect the impact of potential stress related to the Middle East conflict. This includes changes in our base case economic assumptions, a 2.5% increase in the downside scenario weighting to 45% and a net increase in target sector forward-looking adjustments of $148 million.

These increased FLAs relate to sectors expected to be most impacted by fuel costs and supply issues, including agriculture, transport and storage, manufacturing, construction and commercial real estate. Underlying collective provision reduced by $170 million with $35 million of that related to FX movements and the remainder driven by items I referenced in my asset quality remarks on Slide 27.

Moving now to capital on Slide 30. Our group CET1 ratio declined 5 basis points to 11.65% as of the end of March 2026.

This reflected volume growth and market-related impacts across credit provisioning, IRRBB risk-weighted assets and net FX translation. Our Level 1 ratio ended the period at 11.53%.

Both this and the Level 2 ratio are above our operating target of greater than 11.25% and well above the regulatory minimum of 10.5%. I'll now walk through the key moving parts of the Level 2 CET1 ratio as shown on the chart on the screen.

Cash earnings added 81 basis points, partly offset by 59 basis points for payment of the 2025 final dividend. Credit risk-weighted asset movements reduced the CET1 ratio by 24 basis points, mainly reflecting strong business lending growth.

The other RWA bucket includes a range of impacts, which overall have reduced the CET1 ratio by 9 basis points. These include: firstly, a 10 basis point reduction related to increased swap rates impacting the embedded loss component of IRRBB risk-weighted assets; and secondly, a 6 basis point benefit from the removal of the standardized floor adjustment in the period, which resulted from RWA movements in the second quarter.

Net FX translation was a drag of 8 basis points relating mainly to the depreciation of the New Zealand dollar. Offsetting these impacts was an 11 basis point benefit from the sale of our remaining 20% stake in MLC Life during the half.

As we outlined in our pre-announcement, the first half DRP will include a 1.5% discount, and we expect to partially underwrite this DRP. In combination, these initiatives will raise approximately $1.8 billion or 40 basis points of CET1 capital, taking our pro forma ratio to 12.05%.

Going forward, we remain focused on disciplined capital allocation to support profitable growth and drive sustainable shareholder outcomes. There is no change to our operating target of greater than 11.25% or our dividend payout policy of 65% to 75% of cash earnings.

Liquidity and funding are set out on Slide 31. The quarterly LCR ratio is 3 basis points lower over the half at 132% and NSFR was stable at 116%.

Both ratios are well above the minimum requirement. We continue to manage funding and liquidity prudently, and our balance sheet is well positioned for periods of market volatility.

Our term funding issuance is well progressed. We issued $19.6 billion over the first 6 months of the year, supporting repayment of maturities in the period.

Over the course of the financial year '26, issuance is expected to be broadly in line with prior years at around $36 billion. I'll hand now back to Andrew.

Thank you, Inder. Look, as Inder mentioned, the impact of inflationary pressures and a tightening rate cycle, which emerged at the end of 2025 has been compounded by the outbreak of the Middle East conflict and the associated impacts on both fuel supply and fuel prices.

This has made for a far more uncertain and challenging outlook, and it's not surprising that both consumer and business confidence levels have declined sharply. While activity indicators have held up very well to date, elevated uncertainty and cost pressures are expected to slow economic growth.

Business credit, which was growing at an annualized system rate of around 10% in the first half is expected to moderate in the second half. That said, the longer-term outlook for business investment continues to be very positive, supported by key structural drivers, including ongoing investment in infrastructure, in property, in energy transition and in supply chain resilience.

Looking ahead to the second half, the actions taken to strengthen our balance sheet position us well to manage the uncertain outlook and to continue to support our customers. NAB enters this period with good underlying momentum in our business.

The consistent execution of our strategy to deliver improved customer advocacy, supported by a focus on being simpler, faster and more resilient. We continue to progressively modernize our core tech platforms, and we are developing our strategy to deliver value through AI solutions.

Everyone at NAB is focused on delivering progress in our 3 key priorities of growing business banking, driving deposit growth and strengthening proprietary home lending. And there is no change to our disciplined approach to managing costs and driving productivity, which creates the capacity for ongoing investment.

I remain confident in the long-term outlook for our business. We have the right business mix and strategy to deliver sustainable returns to shareholders.

Thank you again for your time, and I'll now hand back to Sally for Q&A.

Thank you, Andrew. We'll now take questions from analysts and investors.

When it's your turn, the operator will introduce you. Can I please ask that you limit yourself to one question and we'll come back to you if time permits.

Please go ahead, operator.

I just had one question about the credit quality trends in the Personal Bank. You said that there was an increase in pre-provision profit, but that was offset by higher impairment charges relating to the unsecured retail portfolio.

Can you quantify those losses relating to cards and personal loans? And maybe comment on why this is happening against the backdrop of a strong labor market and whether you expect trends in consumer unsecured losses to get worse from here?

Yes. Look, good question.

I think what we're flagging is a modest uptick. We are seeing a little bit of seasonality playing through that in the second quarter tends to be a little lighter from a repayments point of view.

And the second issue is we're just seeing some transitory impacts just from the migration of the Citi book, which we're looking into. So we don't think this speaks to a major change in the outlook for unsecured, but those are the couple of items that are driving that trend.

Okay. So Inder in the half, it was really just seasonality that drove the uptick rather than anything more alarming.

Yes, that's right, Richard. And also just a couple of transitioning items with the Citi book, which we'll be able to give you a further update on in the next update.

A related question, but focusing more on the commercial portfolios. Your IP charge was again elevated at 14 bps of total loans in the half, which particularly appears high versus what peers have been reporting over the last couple of halves.

And you'd again put it down to business mix in the stage of the cycle. Andrew, maybe a question for you.

Just in light of this relative returns drag and with the benefit of hindsight, are you happy that over the last couple of years, you've got the risk settings right across your domestic business portfolios, that's both Business and Private Bank and C&IB.

Andrew, I think we do. We're very confident that we earn through any losses that we might have in our commercial segments and portfolio.

It's also important to note that the quality of the book in -- domestically actually improved in both the first quarter and the second quarter of the half. What we're flagging is that we had a very small number of international exposures that we took an individual provision for.

But I think when we look at the domestic portfolio, most metrics actually improved half-on-half.

I just wanted to maybe quickly touch on capital. Like peers, you've done a very impressive job over recent years, optimizing your risk-weighted assets.

And looking ahead, I'd be interested in your views on the likely implication of potentially deteriorating credit quality on risk-weighted assets. In your 1 half results, you effectively approached, you increased provision or you increased your provision by $300 million and also risk-weighted assets -- sorry, I should say, overlays by 8 basis points.

So I'd just be interested in how you think investors should think about this potential risk-weighted asset inflation if credit quality does deteriorate and whether this relationship that you kind of put out in this result is a good guide for how we should think about it?

Maybe I'll have a first crack at that one, Inder, and then you can follow up if I missed anything. I'd say, first and foremost, it's going to be hard, I think, to predict what capital will do in the second half.

We -- some things for consideration for you, we do expect credit growth to moderate from very elevated levels in the first half. So that on the balance will be a positive, but we have to also look at well, what happens and if there's any PD migration to the negative over the course of the half that may drive credit risk-weighted assets.

So we'll have to see what those headwinds and tailwinds do on a net basis. But we did take an increased CP going into this because I think the fact is we don't really know how this is going to transpire.

And I think we all need to be quite humble with our forecasting accuracy right now. This crisis in the Middle East seems to be continuing on, and we just don't know what the duration and intensity of the crisis is.

So we wanted to be prudent going into this so that we could continue to participate in credit growth and to support our customers. So I think we'll have to see how this plays out in terms of what happens to the numbers as we go.

I don't know, Inder.

Yes. Maybe just to give you one data point, Victor, on your question about RWA trajectory.

One way to think about it is if you look at our base case economic projections from here, which call for a moderation of GDP growth and a slight uptick in unemployment. If that actually plays through, we would expect our risk-weighted assets to increase by around $3 billion over the next 12 to 18 months.

Clearly, this is going to be progressive, right? So -- and as Andrew mentioned, there's going to be a series of other dynamics around the broader capital piece that will play through as well.

Andrew, I wanted to go back to your comments on the slowdown in credit growth. Obviously, the business environment has been fantastic for the last couple of years now and reaching 10% growth in the business bank is a great number.

You also said that the pipeline still looks okay. I wanted to get your views on what you're seeing in that pipeline.

Have you actually started to see agricultural customers pull back yet? Have you seen that pipeline weaken just in the last couple of weeks given the volatility?

Is it actually flowing through at the coal phase? Or is it just your expectation that credit growth will slow?

Yes. Look, I'd say we're still seeing a material bifurcation between conditions and confidence.

And so when you look at the actual numbers on a week-to-week basis, you're not yet seeing any material slowdown in application volume and how those apps are flowing through to settlement and the pipeline continues to remain very robust. So if you look at the numbers, and you were not aware that there were a crisis going on, you wouldn't see anything to be worried about, frankly.

But at the same time, when we talk to our customers, you can hear from them that confidence has dipped and they're talking about taking actions to safeguard their business and to moderate their growth settings. So that is a bifurcation and a disconnect, frankly, that we're seeing that really hasn't kind of unraveled yet.

So our expectation is that we'll see a softening, but the truth is we don't see it yet in our numbers.

Great. So is it just too early?

Yes. Look, I'm quite surprised, frankly, that we haven't seen any reduction, but that's where we're at.

So I think it is too early.

Can I just ask a question on the margin. If you give us a little bit more just the outlook and what you're thinking there.

If I kind of run through a few things. What was the rate lag impact in the first half?

You saw also on the home loan side, you saw fixed rate lending increase a little bit. Was that a headwind?

And do you see that as a continuing headwind going forward? On the mix, you talked about the benefit coming through on the deposit side.

Can you just talk about do you anticipate a mix benefit still to come through? Or are you starting to see some shift to TDs that will be a bit adverse on that?

And if there are any changes in competition as well, please?

Inder, do you want to take that?

Yes. Look, obviously, we are cognizant of all of those moving parts.

Clearly, we don't provide specific NIM guidance. But if you look at the impact of rate increases, we obviously had 2 rate increases in this half compared to 2 rate decreases in the last half.

But if we look forward and we only get, say, 1 rate increase, we think the rate lag impact is probably 0.5 basis points or thereabouts in terms of NIM. I think the impact in terms of fixed doesn't really play into that materially, to be honest.

In terms of deposit mix, look, it's difficult to sort of forecast. We've obviously got strong momentum in a number of parts of the business around transaction accounts, and Andrew spoke to that, both in terms of B&PB and also within the personal bank.

And we'll manage the overall mix in terms of how we express appetite for TDs based on how we see the momentum playing through, but we're pretty pleased with the first half momentum.

And we haven't yet seen any migration to yield-bearing deposits in the mix. Is there a potential for that to happen as rates increase and the value to customers of capturing yield is greater.

But to date, we haven't really seen that migration.

Just a question on a capital again. With the RBNZ changes being finalized and coming up in, I think, the 1st of October, can you just talk to the benefit from those changes and its interplay with the pro-cyclicality capital you talked about, noting that you are fairly marginal on the standardized for now?

And just with that sort of tighter capital position, just your priority areas for growth and where might you think even if credit growth does moderate a little bit, do you think you need to pull back on certain areas like institutional to make sure you have sufficient capital for the emerging economic environment?

Yes. Good question.

I might take the first element of that, and then Andrew can talk a bit about the priorities for growth. In terms of the New Zealand regulatory changes, I think 2 main areas of impact.

One is that you'll see the gap between Level 2 and Level 1 close out a little bit, mainly because we have some internally funded Tier 2 in the New Zealand sub that gets a deduction at the top of the house. So you'll see that narrow.

I think secondly, probably a combination of the New Zealand changes and what APRA has proposed here, we should see the standardized floor really become less of an issue for us moving forward. And so our focus really is on the advanced impacts as we expect that standardized floor, which has been a bit tight in the last couple of periods to be less of an issue moving forward.

Andrew, do you want to cover the priority areas for growth?

Yes. I think, look, when I talk to shareholders, they want us to continue to participate in high-quality loan growth, predominantly in our business banking franchise, but also to the extent we can get it in home lending where there are opportunities to grow share above our cost of capital.

I think we're going to continue to look at areas where we're not earning a sufficient return on our capital and continue to tighten the settings to minimize that leakage really. We've done that, I think, really well across our portfolios, but there's still more that we can do there.

We're conscious. We want to be a bank that's generating capital over the course of time, and we know that, that's been hard for us over the last little while.

Some of that explained by the fact that we had very marked and elevated loan growth. And we have confidence that over time that we will generate positive capital in a normalized market environment.

Thanks, Andrew. So can I read that you'd be happy to have a zero discount DRP attached to the full year dividend if shareholders were happy for you to grow.

Yes. I mean, look, I think the other thing to bear in mind is that, obviously, the strong growth that we've experienced is going to translate into higher earnings.

So as we look forward, we're also mindful of earnings per share growth. Our payout ratio in this half is 72.5%.

That's at the upper end of the 65% to 75%. So should we see good opportunities to continue to grow the business strongly, we can manage, I guess, the pace of the EPS growth versus DPS growth, i.e., DPS growth may lag a little bit, right?

Because if we continue to see good opportunities to invest shareholder capital, we will do that. If the payout ratio lags a little bit, that's perfectly fine.

I've just got a question for you, Andrew. It's obviously the second rate hiking cycle that you've seen in Australia.

I just wanted to get your sense if you think the market, in your opinion, is just underestimating the earnings durability of the business and private bank in particular. Obviously, a very strong set of results, but I appreciate it's backward looking, but interested to get your views on how you characterize today versus what you've seen and gone through over the last few years.

Yes. Look, it's -- again, I would say that the ability to project into the future now is more uncertain than it normally would be because of the macroeconomic volatility.

And how that's going to play out for businesses. The Reserve Bank has been clear that they needed to tighten demand because there was a situation in our economy where demand was outstripping supply.

That's why they've raised the interest rate by a couple of 25-point increases, and we expect there'll be one more. I think what's hard to then predict is how much supply has been taken out by the migration of spend to fuel, but that's real for many of our customers, particularly in areas like agriculture, manufacturing, transportation, retail trade.

So what I will say is that our customers, by and large, enter this period in a strong cash position. Deposit at the bank are up meaningfully and most of our customers have relatively lower leverage and strong cash buffers to, I think, withstand the cycle.

And there'll be opportunities for many of them to grow and take advantage of any dislocation. So look, I think we just have to stay close to our customers as we go here, which we intend to do.

But it's really, really difficult, I would say, to project out right now because of that uncertainty in the day-to-day nature of things.

I wondered if I could ask about cost growth, significant change to the capitalization policy. And you've been delivering significant productivity, guiding still to cost growth over 4%.

Andrew, you've called out the moderating lending growth expectations. Does over 4% cost growth remain acceptable in this environment?

Just wondering if you've changed your thoughts at all given the change to software policy?

Yes. Look, we're not, at this point, looking to change guidance to the market in terms of our expense commitments.

But you can be sure that as a management team, we are looking at our cost base and the expenses that we have and that over time, you always need to cut your cost according to what's happening in the revenue environment. And so to the extent there's a possibility that revenues come under any pressure, we would obviously be looking at what happens over time to our cost growth.

It's important, though, to remember that there's lots of areas of cost that our customers value and our shareholders value. So we have to delineate between those costs that drive outcomes and costs where we can drive productivity.

And I do think the new solutions emerging around AI are going to be helpful for us in that regard as a bank. Anything Inder you would add?

Yes. No, I think just to reaffirm, Andrew, I mean, over time, our aspiration as a management team has to be to aim for positive jaws going forward.

We have to be cognizant about the fact that we need to balance the underlying level of inflation in the cost base with the need to invest to support growth in the right areas to make sure we continue to modernize the bank's infrastructure, continue to improve the experience of our customers. So it's something that is very active in our thinking as we get into the planning process for the next couple of years going forward.

Matthew Wilson, Jarden. Just on the software capitalization that Matt Dunger referred to.

This is the third time in 7 years you've written off capitalized software. That's $2.9 billion or $600 million per annum, which has effectively understated your cost base by around 8%.

When you look at your peers in this space, ANZ's best of breed, they expense 80% of their investment spend. They've got the same tech environment that you confront.

You're now only at 50%. I don't think you've gone hard enough.

That's an interesting point of view, Matt. I think we're right in the middle of peers now with the new settings and we'll have to continue to watch.

I do think there is a macro trend here that over time, the value of software assets is likely diminishing as AI advances and the ability to build software or replicate software faster and cheaper emerges. So this is probably something we're going to have to continue to look at, not just as a bank, but as an industry.

But I think for now, our settings are in the middle of peers. And I think as a Board and as a management team, we were happy with where we've come to.

This was an opportunity to sort of at least equalize the best of peers and get ahead of the trend that you clearly understand.

Yes. Look, we'll note your point.

And I think the point that we've had 3 of these in the last 7 years is far from ideal. So -- it's certainly something that we should be looking at.

Clearly, we weren't in the right starting position 7 years ago as a bank in this area.

Brendan from Goldman Sachs. I just want to refer to you to Slide 28, where you show us the NPLs by sector.

You noted today in the presentation that overall asset quality had been improving as the economy picked up and rates were cut over the last 12 months. Could you maybe just talk about a couple of sectors here that over the last 12 months have actually been deteriorating, Obviously, agri, forestry and fishing as well as transport and storage.

And these are the most impacted, obviously, by the energy pricing dislocations. So can you maybe talk about why these things have been deteriorating while the rest of the economy has been improving?

Yes. I might call on Shaun Dooley, the bank's Chief Risk Officer, to come and just address that question.

Shaun, if you don't mind.

Shaun Dooley speaking. So thank you, Brendan, for the question and you're drawing attention to Slide 28 there.

So I think what we're seeing in agri, forestry and fishing is probably a couple of single name exposures that have probably had their own idiosyncratic issues associated with their particular businesses. Some of it has been weather-related, some of it has been supply chain related as well.

So that being said, the portfolio remains a pretty strong portfolio. Its performance over a long period of time has been strong.

It's well diversified and it's industry that we know well, and we have deep specialization, both in terms of bankers and credit people. In terms of the transport and storage, as you said, there's some issues associated with probably supply chain input costs into that.

And that has been a sector, particularly in the transport side of it, where we've probably experienced more challenges in that part of the portfolio. But I think the main takeaway from this slide is the improving performance across the majority of the sectors that we're dealing with in business and private bank.

And you'll see the same thing deeper in the pack around the whole portfolio as well.

And I have a second question on the performance of the Corporate Institutional Bank in the half. I'm referring to Page 44 of the 4D.

You've had very strong lending growth, almost 7% in the half and almost 13.5% over the year. But we're actually seeing very weak lending and deposit income growth.

Can you maybe talk to some of the drivers of why that's the case and whether -- particularly as we're entering probably a period of a slowdown, how you expect that to change over the next 6 to 12 months?

Yes. Look, I mean, overall, I'd say, looking at the returns that the C&IB business is producing at around 15%, we're very pleased with the progress that we're making.

I think clearly, we've seen some impairment charges come through, which we've referenced in Andrew's remarks. I think on net interest margin, it's probably fair to say that we've seen a little bit of NIM compression in the half.

You'll pick that up as you get through the back pack of the slides. NIM half-on-half is off about 14 basis points, which I think contributes about 1 basis point in lending compression at the company level.

But really, what's driven that on the deposit side is we've seen the cut in U.S. dollar cash rates impacting the deposit book.

That's been about 3 basis points. We've also lost the benefit of the custody business that we had, which we've now exited that had given us probably about a 2 basis point headwind on the deposit margin.

So deposit margin is off a bit. On the lending side, we are seeing a little bit of heightened competition, as I referenced in my remarks albeit the returns remain very strong.

We've also had a bit more of a skew towards growing the Australian corporate book where we've got good momentum. We've now built better capability in areas like transaction banking.

So the overall relationship ROE is very strong. But look, it's a fair point that in the half, the asset growth and the income growth has probably not kept pace, but we expect that to improve a little bit into the second half.

One other point I would make is that I think in the month of March, there was material drawdown activity in the top end of town, likely due to concerns at the time regarding the Middle East crisis. And given that, that was at the end of the period, we probably didn't get the full benefit of earned income in those -- in that asset growth.

But were that to continue, that would normalize and align, I think, over the continuity of time.

Just I've got a question just as far as the capital, which is kind of summarized on Slide 30. If we have a look at NAV historically, you've kind of committed to the 65% to 75% payout ratio and neutralizing the dividend reinvestment.

The one disappointing aspect I really think of this result, which was effectively pre-flagged is the DRP issuance. Could we just get some comment -- and the other thing I suppose I'd flag is the 11.65% to 12.05% pro forma, that's assuming you raise the money from the dividend reinvestment, but it actually doesn't take out the dividend itself.

So if we were to go through all of that, it comes back to about 11.47%, which is a surplus, I think, above the minimum of about $980 million. Can we just get a feeling on, is that enough surplus capital that we should be confident you can resume neutralizing the DRP?

Or has -- or because of the overlays, has the capital intensity effectively permanently gapped up to the point where you can't neutralize the DRP going forward?

Quite a lot in that question, Brian. Maybe if I start with.

It's one question with 20 hidden there, Inder.

No, I appreciate it, Brian. On the -- if you look at the dividend that you are looking through the pro forma, we can argue for a long time as to how you roll forward the capital position.

But if you start with 11.65%, by the time we pay the dividend, we would have probably accreted that by another 30 to 40 basis points of earnings, Brian. So by the 1st of July, if you wanted to pro forma it at that point, you could say, take the dividend off, give us the credit back for the DRP and the underwrite.

So 60 basis points of dividend comes off, 40 basis points of the benefits from the DRP actions come back on. So we could spend a long time going around the houses on this, but we're sort of seeing the capital position probably being in the high 11s and the low 12s as you roll through the earnings through the course of the year.

I think your broader question is a good one, which is how do we think about the sustainability of balancing growth, the dividend where it's at, et cetera. And look, it's unfortunate on the overlays that we've had 2 significant overlays on our RWAs in this half and the previous half.

Obviously, we don't expect that to be a sustaining trend. We've had a series of recalibrations to do on our models, which we are progressing through.

So we obviously aspire to have strong models with limited overlays of this type of nature going forward. But as I referenced earlier, I think if we can translate the balance sheet growth to earnings growth, we should see the earnings per share grow over time.

We have the opportunity to be able to fund higher credit growth by managing down the speed with which the DPS grows at, right? So you should be able to accrete capital going forward.

So at the moment, we feel pretty good looking at the second half that we don't need to put a discount on the DRP. But we're just going to have to execute well, Brian, make sure we're allocating capital sensibly.

We're driving the right volume margin trade-off that we're investing in the right places and driving value from that, managing our costs and driving efficiencies. So I think it's as much about the capital generation levers more broadly and how we execute against those.

But stock of capital is in a strong position, and we feel good about the second half.

So Inder -- but am I right in thinking the formal kind of guidance, if you'd like to call it that on the DRP neutralization no longer exists?

No, we're not seeing any changes to any of the capital policy settings. We are basically saying here's a series of actions that we're going to take in relation to the first half.

Can you hear me okay?

Yes.

Perfect. Just a question on productivity, if I can.

I mean if we go back 12 months ago to the first half '25 results, you did about $130 million of productivity for $420 million for the full year. Now you've had quite a strong half this half in terms of $200 million of productivity.

So to what extent is the bottom end of that greater than $450 million of productivity guidance? And to what extent is that conservative given the hard work you've put through in the first half?

Well, look, I'd say we have fairly meaningful targets. The $450 million plus is an ambitious target.

We are making good progress through it through the course of the first half. As you picked up from the various comments we've made during this briefing, we've got a real focus on making sure we can drive operating -- positive operating jaws as we look forward on a multiyear basis.

We've got work to do to continue to not just deliver the current targets, but continue to build on those over the coming years. So -- and we're looking at all options in terms of what we can do around deploying tools to continue to enhance that.

But you can be sure we're running hard as a management team in this area. And if we can beat that number, we will.

Thank you. I'd like to thank everyone for joining us today.

If you do have any follow-up questions, the Investor Relations team will be available to help. Thank you.