National Australia Bank shares (ASX:NAB) broke through the A$40 resistance level today as markets reacted positively to the bank’s latest quarterly earnings report. The stock ended the day at A$40.23, up 2.65% at closing.
The rally follows NAB’s release of unaudited cash earnings of A$1.77 billion for the third quarter of FY25. While this figure is flat year-on-year and down 1% from the first half average, the market is focusing on the underlying profit growth.
NAB reported a 2% increase in underlying profit compared to H1 FY25 and a 4% rise relative to Q3 FY24. This positive signal has overridden concerns about flat headline earnings. The bank’s statutory net profit came in at A$1.66 billion, a 3% decrease from the first half.
NAB’s Common Equity Tier 1 (CET1) ratio, a key measure of financial strength, stood at 12.14% at the end of June 2025. This represents a 13 basis point increase from the 12.01% reported in March 2025, further bolstering market confidence.
Third-quarter revenue increased by 3%, and the bank’s net interest margin (NIM) expanded by 8 basis points. Excluding the impact of Markets & Treasury (M&T) and lower volumes of liquid assets, NIM rose 4 basis points compared to the first half. This indicates improved profitability in NAB’s core lending operations.
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However, the bank also reported a quarterly credit impairment charge of A$254 million. This includes individually assessed charges of A$215 million, primarily related to business lending in Australia and New Zealand, as well as unsecured Australian retail portfolios.
Looking ahead, NAB expects operating expense growth of approximately 4.5% for the full fiscal year 2025. Managing expenses effectively will be crucial for maintaining profitability in the face of potential economic headwinds.
NAB’s valuation metrics suggest a premium valuation. The price-to-earnings ratio (normalized) is 16.65, return on equity (normalized) is 11.83%, and the price-to-book value is 1.91. While these figures suggest NAB is trading at a premium compared to historical averages, the bank’s management focus on core domestic banking and a robust balance sheet support this premium.
Today’s move for NAB bulls in recapturing the A$40 level could prove pivotal in the next leg for holders. The fact the move was driven by fundamentals of improving underlying profit, a higher NIM, and prudent capital ratios is a positive sign, yet the retest, should it arrive could confirm whether the level will begin to act as support in the periods ahead.
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