Higher interest rates are beginning to show more clearly in bank credit costs, with National Australia Bank reporting a sharp increase in impairment charges despite growth in underlying income.
NAB reported full-year cash earnings of A$6.14 billion, down 13.4%, while statutory net profit also came in at around A$6.14 billion.
Credit impairment charges rose to A$1.55 billion from A$833 million a year earlier, reflecting a more cautious outlook and higher provisions for potential loan losses.
NAB also booked a major software-related charge during the year, which contributed to the decline in headline earnings.
Underlying operations were stronger.
Net operating income increased 5.8% to A$22.01 billion, while net interest income rose as lending volumes and margins improved.
However, investors focused on the weaker bottom line and higher credit costs, sending NAB shares down more than 7% in morning trade.
The result comes just days after the RBA lifted the cash rate to 4.85%.
Higher rates can support bank margins, but they also increase financial pressure on households and businesses, potentially leading to more arrears and bad debts.
That trade-off is likely to become increasingly important for Australian banks if interest rates remain elevated through 2027.
