Big bank takes action as Middle East crisis rolls on
As the crisis in the Middle East continues to bite, the second largest bank is taking action to protect its business amid an uncertain economic outlook.
National Australia Bank has flagged higher provisions due to an increase in loan impairment charges and will discount and partially undertake a dividend reinvestment plan to raise extra funds.
“In light of the volatility in markets following the conflict in the Middle East, National Australia Bank (NAB) has now reviewed its loan provisions and capital settings to better reflect the risks inherent in our business,” the business-focused bank said.
Last week Westpac revealed that the conflict had negatively impacted the earnings contributions of its treasury and markets trading division.
The unit’s net interest margin contribution will fall from 15 basis points in the first quarter to seven basis points in the second quarter of 2025/26.
NAB will charge a $706 million credit impairment charge when it reports first-half results on May 4; this will be approximately 68 percent higher than the previous first half.
This will include a $152 million “economic adjustment” fee, reflecting the changing landscape of the Australian economy, which is expected to weaken as the conflict continues.
The bank will also allocate $201 million for adjustments to address potential stress in energy-related business sectors likely to be affected by fuel supply issues and conflict-related costs.
NAB chief economist Sally Auld warned in March that the macroeconomic outlook was moving into a riskier phase and that the impact of major shocks on oil prices would be exacerbated by tightening financial conditions.
“As forecasters, this development worries us about downside risks to growth,” he said.
Ms Auld predicts the Australian economy will grow by just 1.8 per cent in 2026 and 2027; this rate was up from the previous estimate of two percent per year.
Ms Auld said the increase in retail fuel prices was expected to push inflation to 5 per cent annually in the second quarter, while unemployment could rise to 4.75 per cent in 2027.
NAB shares fell more than three percent to $41.01 in Monday morning trading.
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