By Stuart Condie

SYDNEY--National Australia Bank reported lower-than-expected first-half earnings and warned that the local economy faces a significant shock from the Iran conflict.

Australia's third-largest bank by market capitalization on Monday reported a net profit for the six months through March of 2.75 billion Australian dollars, equivalent to US$1.98 billion.

That was 19% down on a year earlier and well short of the average analyst forecast of A$2.95 billion, as calculated by Visible Alpha.

NAB's bottom line was hit by a software amortization charge of A$1.35 billion and a A$358 million increase in credit impairments to A$706 million, both of which the lender flagged last month.

With Australia's central bank raising interest rates in an effort to tackle the surge in inflation from higher fuel prices, NAB's increased caution comes as the country's major banks increase their buffers against potential economic shocks.

Analysts have flagged NAB, which is Australia's largest business bank, as particularly exposed to headwinds.

"The Middle East conflict makes forecasting uncertainty extremely high, with higher oil prices and related disruptions adding sharply to near-term inflation and creating real risks to both inflation and growth," NAB said Monday.

"The size of the shock is significant but hard to quantify, and is highly dependent on the extent and persistence of the crisis."

Westpac and ANZ have also announced higher credit provisions. Commonwealth Bank of Australia, the country's largest lender, reports to a different financial calendar and is scheduled to give a third-quarter trading update next week.

More than half of NAB's credit-impairment increase relates to sectors most likely to suffer from fuel supply constraints and higher costs stemming from the Iran conflict.

NAB is aiming to further build its capital buffers by raising A$1.8 billion through a discounted, partially underwritten dividend reinvestment plan for its interim dividend. It held the payout at A$0.85 a share.

First-half revenue rose 8.7% to A$11.16 billion on lending volume growth and an 11 basis-point increase in net interest margin.

Operating expenses rose 4.4% to A$5.02 billion, which NAB said included investment in proprietary lenders and bankers in its personal banking division.

Stripping out one-off items, first-half cash profit edged 0.1% higher to A$3.59 billion.

"We are well placed to navigate a period of increased volatility. We will continue to manage our business for the long term," Chief Executive Andrew Irvine said.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

May 03, 2026 19:32 ET (23:32 GMT)

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