Upgrade to Buy: Business leadership

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Upgrade to Buy: Business leadership

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Natl Aust Bank

Rating Change: BUY | PO: 42.50 AUD | Price: 36.99 AUD

Upgrade to Buy. Market too negative, re-rating warranted 01 July 2026 Corrected

We upgrade to a non-consensus Buy supported by underlying profit growth and with the Equity

market too negative on credit quality. PO raised to A$42.50/US$14.88 (+11.8% from

A$38.00/US$13.30). BofAe +2% ahead of FY27 cons. Catalysts: 17 Aug 3Q26 trading

Key Changesupdate for NIM and bad debts; 5 Nov FY26 result for FY27 cost guidance.

(A$) Previous Current

Inv. Opinion A-2-7 A-1-7Leading underlying profit growth, Business over Retail

NAB is best placed amongst major banks to drive future operating leverage, in our view. Inv. Rating NEUTRAL BUY

We forecast c.6% underlying profit growth in FY27, outpacing retail peers (CBA/ WBC), Price Obj. 38.00 42.50

as mortgage growth slows. NAB’s revenue outlook is supported by: 1) favourable mix; 2026E EPS 2.08 2.09

business outpacing mortgage credit, 2) an improved proprietary mortgage offering, 3) 2027E EPS 2.47 2.53

deposit growth and pricing discipline, 4) replicating portfolio benefits. Cost growth 2028E EPS 2.51 2.58

below 4% is supported by leadership on data and simplification. NAB’s efficiency lags

only CBA; we forecast CTI below 46% vs CBA at 45%. Matt Dunger >>

Research Analyst

Merrill Lynch (Australia)

+61 2 9226 5329Credit quality concerns may be over-blown matthew.dunger@bofa.com

Credit quality remains the key investor pushback. NAB has built coverage towards the

Aida Pita >>

top of peers and Business bank impairments stabilised at 12bp in 1H26. We estimate Research Analyst

that the current stock price implies FY27 bad debts at c.25bp vs consensus at 14bp. Merrill Lynch (Australia) +61 2 9226-5066

aida.pita@bofa.com