NAB Just Crossed a Key Milestone — Is This the Inflection Point?

Markets don’t ring a bell when a turning point arrives. But every now and then, they drop clear enough signals for investors to notice. That is exactly what’s happening with National Australia Bank (ASX: NAB) right now.

In its latest update, NAB checked off two important boxes that often set the stage for a meaningful re-rating: capital strength and profit momentum. Together, they suggest that the bank may be entering a new chapter where it shifts from being a “defensive hold” to a “selective growth” story.

So, has NAB just reached an inflection point? Let’s dig into the numbers.

What milestone did NAB cross?

The market’s attention is fixed on two breakthroughs:

1. Capital strength
   At 30 June 2025, NAB’s Level 2 Common Equity Tier 1 (CET1) capital ratio stood at 12.14%, up from 12.01% in March. On a pro forma basis, including the sale of its remaining 20% stake in MLC Life, CET1 would have been even stronger at 12.25%.
   Why does this matter? Investors often treat the 12% CET1 line as a comfort threshold. Once a bank is solidly above it, the market becomes more confident about dividends, buybacks, and other capital returns.
2. Price signal
   In August, NAB’s stock recaptured the $40 mark, a psychological and technical milestone. This wasn’t just a random move: it came on the back of improving performance. Underlying profit rose 2% versus the 1H25 quarterly average and 4% versus 3Q24, while group net interest margin (NIM) expanded 8 basis points. These are signs that the bank’s core operations are regaining traction.

Put together, these markers create a powerful narrative: NAB is not just holding its ground—it may be starting to turn upward.

Under the hood of the Q3 update

The headline numbers are only part of the story. NAB’s unaudited 3Q25 cash earnings came in at $1.77 billion. On the surface, this was flat year-on-year and slightly softer (down 1%) compared to the 1H25 quarterly run rate. But look closer, and you’ll see healthier signals:

1. Underlying profit rose 2% versus the half-year average and 4% year-on-year, stripping out market noise.
2. Net interest margin expanded by 8 basis points. Even if we exclude Markets & Treasury and lower liquid asset volumes, the NIM still improved 4 basis points. That means the core lending engine is grinding higher.
3. Lending momentum was strong. Business & Private Banking grew business lending by 4% across the quarter, including a record monthly increase in June balances. Meanwhile, Australian home lending grew 2%, broadly in line with the system.

These drivers add up to one takeaway: revenue stability is forming. For a bank, that stability is the foundation on which higher dividends and capital returns can be built.

Revenue and capital footing

NAB reported $30.82 billion in total revenue in the first half of FY25—a solid base from which to build. Pair that with its CET1 ratio comfortably above 12%, and the story starts to look attractive.

Dividends: NAB paid an 85-cent fully franked interim dividend (ex-date 12 May, paid 2 July). With the final dividend decision due in November for December payment, the market is now speculating whether a higher payout could be on the table.

Timing: Importantly, the interim dividend payment did not affect the June CET1 number. That means the capital position reflected in the quarter was a “clean” pre-distribution snapshot—reinforcing confidence that capital generation is healthy.

With these conditions, an at least steady—possibly higher—final dividend looks increasingly plausible.

What could extend the inflection?

Three levers stand out:

1. Macro and margins
   If funding costs ease and competitive pressure stabilizes post-peak rates, NAB’s NIM could keep climbing. Every basis point of margin expansion boosts earnings leverage.
2. Business franchise
   NAB is showing momentum in business lending. If it can sustain high single-digit annualized growth, fee income and spreads will remain resilient, offsetting any consumer slowdown.
3. Capital actions
   With CET1 pro forma at 12.25%, NAB has optionality. Management could consider selective buybacks or dividend reinvestment plan (DRP) neutralization—moves that would add to shareholder returns without undermining balance sheet strength.

Together, these levers compound the story: capital is strong, earnings are stabilizing, and optionality is increasing.

Watch outs before calling the turn

Of course, no bank is without risks. For NAB, investors need to keep an eye on:

1. Credit cycle risks: A sharp rise in arrears or large catastrophic (CAT) insurance losses could force higher provisions, hitting cash earnings and payout flexibility.
2. Margin competition: If deposit pricing heats up again or mortgage discounting intensifies, the NIM rebuild could stall.
3. Regulatory buffers: The Australian Prudential Regulation Authority (APRA) could tighten requirements, raising the bar for CET1 and absorbing part of the current headroom.

These are not deal-breakers, but they are reasons why management emphasizes “underlying profit” and capital discipline rather than leaning too heavily on one quarter’s results.

So, is this the inflection point?

The short answer: it’s looking more and more like it.

By crossing two thresholds—capital above 12% CET1 and a return to modest NIM/profit growth—NAB has signaled a shift in momentum. The market rewarded this by lifting the stock back above $40. And with business lending strong, dividends stable (and possibly higher), and capital buffers healthy, the conditions are set for a potentially stronger finish to FY25.

But inflection points are not about one quarter. They’re about sustained patterns. If NAB can hold its NIM gains, keep business lending growing, and avoid major credit shocks, this moment may well be remembered as the point where NAB moved from defense to offense.

Disclaimer:

General Financial Product Advice and Regulatory Framework: Pristine Gaze Pty Ltd (ABN 66 680 815 678, ACN 680 815 678) operates as Corporate Authorised Representative (CAR No. 001312049) of Alpha Securities Pty Ltd (AFSL 330757), which is licensed and regulated by the Australian Securities and Investments Commission under the Corporations Act 2001 (Cth). This report contains general financial product advice only and has been prepared without consideration of your personal objectives, financial situation, specific needs, circumstances, or investment experience. The information is not tailored to individual circumstances and may not be suitable for your particular situation. Before acting on any information contained herein, you should carefully consider its appropriateness having regard to your personal objectives, financial situation, and needs, and consider seeking personal financial advice from a qualified financial adviser who can assess your individual circumstances and provide tailored recommendations.

Investment Risks and Market Warnings: All investments carry significant risk, and different investment strategies may carry varying levels of risk exposure including total loss of invested capital. The value of investments and income derived from them can fluctuate significantly due to market conditions, economic factors, company-specific events, regulatory changes, commodity price volatility, currency fluctuations, interest rate movements, and other factors beyond our control. Securities markets are subject to market risk from general economic conditions and investor sentiment, liquidity risk affecting the ability to buy or sell securities at desired prices, credit risk from issuer default or deterioration, operational risk from inadequate internal processes, sector-specific risks including industry regulatory changes, technology obsolescence, management changes, competitive pressures, supply chain disruptions, and mining-specific risks including resource estimation uncertainty, operational hazards, environmental compliance, permitting delays, commodity price cycles, geopolitical factors affecting mining operations, and exploration risks. Small-cap and speculative mining stocks carry additional risks including limited liquidity, higher volatility, dependence on key personnel, limited operating history, uncertain cash flows, and potential failure to achieve commercial production.

Information Accuracy and Limitations: While we endeavour to ensure information accuracy and reliability, we make no representations or warranties (express or implied) regarding the accuracy, reliability, completeness, timeliness, or suitability of information provided, except where liability cannot be excluded under applicable law. This report may include information from third-party sources including company announcements, regulatory filings, research reports, market data providers, financial news services, and publicly available information, which we do not independently verify and for which we assume no responsibility. Past performance, examples, historical data, or projections are not indicative of future results, and no guarantee of future returns is provided or implied. To the maximum extent permitted by law, Pristine Gaze Pty Ltd and Alpha Securities Pty Ltd, together with their respective directors, officers, employees, representatives, and related entities, exclude all liability for any errors, omissions, inaccuracies, loss or damage (including direct, indirect, consequential, or special damages) arising from reliance on information provided, investment decisions made based on this report, market losses, opportunity costs, and technical issues or system failures.