New Issue: NAB launches new bonds attractive yield in the range of 5.5% to 6.4%

• 3-year senior unsecured bond: NAB's Oct 2029 bond offers an indicative yield to maturity of 5.5%, representing a spread of 73bps over the Australian Government bond yield.

• 5-year callable Tier 2 bond: NAB's Nov 2036 bond offers an indicative yield to call of 6.4%, representing a spread of 165bps over the Australian Government bond yield.

• Recommendation: We remain positive on NAB's credit profile. Investors seeking short- to medium-term exposure may consider the two bonds highlighted below (Table 1). Alternatively, investors may consider NAB 6.558% 12 May 2041 Corp (AUD) Tier 2 bond, which offers a yield to call of approximately 6.6% and 9 years and 6 months to its next call date. This bond aligns with our preference for longer-duration exposure under the barbell strategy, alongside shorter-duration bonds.

Table 1: NAB New Issuance Bond

Bond name	Bond Seniority	Year to Call/Maturity	Indicate Yield to Call/Maturity	Min / Sub investment amount	Credit Rating (Fitch)
NAB Oct2029 Corp (AUD)	Senior Unsecured	-/3Y	-/5.5%	AUD10,000/10,000	N.R.
NAB Nov2036 Corp (AUD)	Tier 2	5Y/10Y	6.4%/6.4%	AUD10,000/10,000	A-
** Investors should note that the final issuance yield may differ from the initial guidance, depending on market demand and pricing conditions at the time of issuance. Source: Bondsupermart, iFAST Compilations. Data as of 5 November 2026

• Company Overview: NAB is the third-largest banking group in Australia, with a market capitalisation of approximately AUD127 billion as of 5 November 2026. The bank maintains a strong franchise in retail banking, supported by leading market positions in residential mortgages and household deposits.

• Strong Earnings Performance: NAB delivered a solid 3Q26 performance, with net interest income increasing 4% YoY to AUD4.6 billion, while net interest margin (NIM) improved by 1bp to 1.79%, supported by 6% YoY loan growth. Non-interest income also increased 13% YoY to AUD0.9 billion. Overall revenue growth was supported by volume growth and well-managed deposit margins, which helped mitigate softer Markets & Treasury (M&T) performance.

• Resilient Asset Quality: Non-performing loan (NPL) ratio improving to 1.50% from 1.54% in 3Q25. This was supported by a 3bps decline in the ratio of impaired assets to gross loans and advances (GLAs), reflecting improved outcomes across the Australian and New Zealand business lending portfolios.

• Prudent Provisioning: NAB increased its total provisions for credit impairment to AUD 6.44 billion in 3Q26, up from AUD 6.15 billion in 3Q25. This supported a total provision coverage ratio of 1.67% of credit risk-weighted assets (CRWAs), up from 1.63% in 3Q25, with approximately AUD2 billion of forward-looking provisions maintained for potential stress in the outlook.

• Robust Capital Position: NAB reported a CET1 capital ratio of 11.93% comfortably above APRA’s minimum regulatory requirement of 10.25%. Capital generation from earnings contributed 41bps, partly offset by Risk-Weighted Assets (RWA) growth of 13bps, reflecting continued loan and balance sheet expansion.

• Strong Liquidity Position: NAB reported a Liquidity Coverage Ratio (LCR) of 134% and a Net Stable Funding Ratio (NSFR) of 115%, both comfortably above the regulatory minimum of 100%. In addition, the bank maintained a substantial LCR surplus of approximately AUD $54 billion, providing a strong liquidity buffer against potential market stress and funding volatility.

• Mortgage Applications Weaken After Federal Budget: Monthly home lending applications declined by 15% following the Federal Budget tax changes and were down 16% YoY. The decline was driven by weaker investor applications, which fell 17%, while owner-occupier applications decreased 14%. This points to softer housing demand and potential headwinds to mortgage growth in the coming quarters.

• Housing Loan Growth Expected to Moderate: NAB Economics expects Australian system-wide housing credit growth to slow from 6.7% in FY26 to 2.5% in FY27. Owner-occupier credit growth is expected to slow to 4.5% in FY27, while investor lending system growth is forecast to contract sharply to -1.4% in FY27 as higher interest rates and tax revisions weigh on properties. We echo the same view highlighted in our previous article, as the 2026–27 Federal Budget is expected to curb speculation in established properties while maintaining tax incentives for new residential development.

• Strong equity buffer: NAB's average loan to value (LTV) stood at 37.9% in 3Q26, below its 5-year average of 39.4%. Even under a severe 40% decline in property values, LTV would rise to only 63.2%, indicating strong mortgage portfolio resilience against property price corrections.

• Growth Moderation Rather Than Credit Deterioration: Despite weaker mortgage activity following the Federal Budget and in the latest quarter, NAB expects the slowdown to reflect a moderation in lending momentum rather than a deterioration in credit quality. Asset quality remains resilient, supported by prudent provisioning and strong borrower repayment capacity.

• Overall: We remain positive on NAB, supported by its strong credit profile, resilient asset quality, prudent provisioning, and robust capital and liquidity buffers. Although slower housing credit growth and continued lending competition may weigh on earnings momentum, NAB's solid balance sheet and funding profile provide a strong buffer, reinforcing its position as a high-quality and defensive credit.

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