NAB Shares Reclaim A$40 With Banks Back In Focus

National Australia Bank shares (ASX: NAB) clawed back above the psychologically significant A$40 threshold to start the week, marking a notable recovery for the major lender even as analysts warn that the easy earnings growth of recent years may be drawing to a close.

NAB shares closed at A$40.05 on Monday, up 1.11% for the session, successfully recapturing the A$40 handle after weeks of consolidation in the high-30s. The move caps a strong month for the stock, which has added 6.91% over the past four weeks as markets rotated back into high-yielding financials following a Budget-night sell-off in May.

Despite the recent bounce, NAB remains 5.54% lower year-to-date, underscoring the challenging backdrop Australia’s major banks have faced in 2026.

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NAB’s fundamentals present a mixed picture that explains both the recent rally and the lingering caution among professional analysts. The bank’s first-half 2026 results showed solid revenue trends driven by its core business banking and SME lending franchise, where NAB maintains a structural competitive advantage. However, cost pressures from technology investment and regulatory compliance continue to weigh on operating leverage, even as management pursues digitisation and simplification initiatives.

On the balance sheet, NAB’s Common Equity Tier 1 capital ratio sits in the mid-11% range, above regulatory minimums but modestly lower than six months prior due to lending volume growth and capital returns to shareholders. The bank has utilised dividend reinvestment plans and selective buybacks to manage its capital position, recently implementing a DRP discount and partial underwrite to maintain CET1 within management’s target band of 11–12%.

Asset quality remains benign by historical standards, with credit losses still well below long-run averages. Nonetheless, management has acknowledged a normalisation process underway, with arrears gradually ticking up from ultra-low pandemic-era levels as higher interest rates and cost-of-living pressures work through household and business sectors.

Net interest margin pressure represents the most significant near-term headwind. Intense competition in mortgages and business lending, combined with elevated deposit pricing as customers chase higher rates, has squeezed the gap between what NAB earns on loans and pays on deposits. This dynamic is industry-wide but particularly acute for NAB given its business lending mix, where corporate clients have greater bargaining power than retail mortgage holders.

Macro Backdrop

Broader market forces have played a significant role in NAB’s recent price path. Australian bank stocks sold off sharply on Budget night in May, with NAB down more than 2% intraday as markets digested housing-related policy measures and concerns about investor-heavy mortgage books. The subsequent recovery reflects both an easing of those immediate fears and a global swing back toward risk assets as equity markets stabilised.

Interest rate expectations continue to shape sentiment around the banking sector. A “higher for longer” rates environment presents a double-edged sword: it supports margins if deposit pricing can be managed, but raises funding costs and increases the risk of credit deterioration among borrowers already stretched by elevated mortgage repayments and business debt servicing.

What Next For NAB?

The path forward for NAB shares hinges on the trajectory of net interest margins, the extent of credit normalisation, and the bank’s ability to maintain capital returns while absorbing higher impairment charges.

Bulls argue that much of the bad news is now reflected in the price, positioning NAB as a mean-reversion and income play if macro conditions stabilise rather than deteriorate further.

Bears counter that earnings risk remains skewed to the downside, with margin pressure likely to persist and credit losses poised to rise from current benign levels.

Technical factors around the A$40 handle add another layer to the narrative. Having reclaimed this psychological level while still negative year-to-date, NAB now faces the test of whether buying interest can push the stock through overhead resistance in the low-40s, or whether profit-taking and cautious institutional positioning will cap rallies as they have in recent months.

With US bank earnings season beginning this week, there will be plenty of peer data that could provide some impetus either way.