Why fund managers are split on National Australia Bank after its profit warning

NAB flagged the largest profit warning among the big four banks, with rising bad debts and a capital raise, even as some managers call it their preferred major bank.

18 Jun 2026 · 6 min read

Major bank National Australia Bank delivered the largest profit warning among the big four heading into its FY26 half-year result, flagging higher bad debts, a software impairment and a partially underwritten dividend reinvestment plan. Pendal Group's May 2026 Newsletter detailed underlying bad debts running at 18 basis points of gross loans, double the level of peers, though partially attributed to one-off impacts from two problem loans in the European telecommunications sector.

Better margins, weaker asset quality

Pendal Group's April 2026 Newsletter had already flagged the mechanics behind the downgrade: collective provision top-ups of $300 million, similar in scale to Westpac's $200 million, alongside a write-down of capitalised software to reduce the amortisation headwind, together driving total FY26 downgrades of around 15%. Out-year forecasts were cut further by around 2% following a partial dividend reinvestment plan underwrite to raise $1.8 billion, reflecting tight capital alongside continued loan growth and bad debt charges.

NAB is potentially more exposed given its skew to business banking.

— Pendal Group, Newsletter, March 2026

Not every aspect of the update was negative. Pendal's May 2026 report noted NAB's margin outlook was the most upbeat of the major banks, supported by deposit growth and a large hedge tailwind, with less competitive reinvestment than peers, meaning the underlying profit trend was arguably the best of the three even as the headline bad debt charge was the highest. Investors Mutual Limited's June 2026 Article rated the stock a hold on that basis, describing NAB as its preferred major bank pick given its SME-focused, relationship-based franchise and lower exposure to housing market and mortgage growth compression than peers.

What managers are watching next

Views diverge sharply on where NAB goes from here. Plato Investment Management's June 2026 Article rated the stock a sell despite a 6.6% gross yield including franking, arguing rising interest rates and reduced consumer spending will likely lift bad debts from both the newly-purchased-property segment and the small business end of the market. Yarra Capital Management has maintained an underweight position throughout, arguing in successive reports that elevated Australian bank valuations are not supported by the sector's low growth and return outlook, even as Auscap Asset Management separately flagged the four major banks now account for 24% of the ASX200 despite facing what it calls unprecedented mortgage market competition from Macquarie.