Hard To Justify

Research evidence excerpt

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M

Idea

August 17, 2026 03:29 PM GMT

Nat Aust Bank | Asia Pacific

Morgan Stanley Australia Limited+

Richard E Wiles

Equity Analyst

Hard To Justify

Sally Hong, CFA

Equity Analyst

In our view, the uncertain operating environment and a weak

earnings outlook make NAB's share price rally during July and

current trading multiples hard to justify. We stay UW.

Key Takeaways

Operating trends were sound in 3Q26 and there were no surprises in the update.

However, we believe NAB's revenue growth is slowing, it has limited flexibility on

costs or capital, and caution on credit quality is warranted.

NAB's 3Q26 individual provision charge was its lowest since 1Q25. However,

credit quality appears to be turning.

We've lowered our FY27 cash EPS estimate by ~1.5%. Our price target is

unchanged.

We estimate a modest EPS decline (ex notable items) and an ROE of ~11% in

FY27, making a P/E of ~17x and a P/BV of ~1.9x hard to justify, in our view.

A lower underlying loss rate, but credit quality turning: NAB's 3Q26 individual

provision charge of A$180m or ~9bp of loans was its lowest since 1Q25. However,

the collective provision went up by A$119m, even though NAB did not change its

Economic Adjustment (EA) or add to its Forward Looking Adjustments (FLAs). The

increase reflected "business lending volume growth and deterioration in performing

book asset quality". For the year-to-date, NAB's loss rate is tracking at ~17bp of total

loans. Given a good track record over the past ~13 years and the absence of

industry-specific 'red flags', we estimate the total charge to be flat at ~17bp (or

~38bp of non-housing loans) next year. However, the combination of >25% growth

Nat Aust Bank (NAB.AX, NAB AU)

Australia Banks | Australia

Stock Rating

Industry View

Price target

Up/downside to price target (%)

Shr price, close (Aug 17, 2026)

52-Week Range

Sh out, dil, curr (mn)

Mkt cap, curr (mn)

Avg daily trading value (mn)

Underweight

Cautious

A$34.00

(14)

A$39.46

A$49.45-35.48

3,085

A$121,720

A$201

Fiscal Year Ending

09/25 09/26e 09/27e 09/28e

ModelWare net inc (A$

mn)

EPS (A$)**

Prior EPS (A$)**

DPS (A$)

Div franking % (%)

ROE (%)

…