Loan arrears at the bank jumped 26 basis points in a year to 1.39 per cent, its highest level since 2020, equating to about $10 billion of NAB’s loan book. Irvine said while hardship applications had plateaued in the second half of the year, he expected arrears to continue rising during 2025.

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“While there’s delinquency, that’s not leading to impairments on the housing side [because house prices continue to be strong],” Irvine said. “On SME [small and medium enterprises], it’s a little bit different. We’ve also continued to see rises in delinquency, but we have taken some specific impairments in SME, there were a handful of large business and private banking names that hit us.”

The bank booked writedowns for bad debts in the construction, agribusiness and discretionary spending-related industries, while the supply chain, manufacturing sectors and food businesses were also stressed, he said.

He expected business delinquencies to rise over the next 12 months amid pressure on their profit margins.

“Their supply costs are still rising, but they’re unable to pass that on to their customers,” Irvine said.

“In food processing and manufacturing, input costs are going up, but supermarkets are pushing hard to not have price increases for their consumers, so that could be pinching certain suppliers”

NAB’s business and private banking arm reported cash earnings of $3.3 billion. Profits at the personal banking division fell almost 20 per cent to $1.2 billion as intense competition in the mortgage market hurt its margins.

The bank’s net interest margin – a key measure of profitability comparing banks’ funding costs with what they charge for loans – fell 3 basis points to 1.71 per cent.

Expenses rose 4.5 per cent, driven by labour, restructuring and technology costs. NAB has budgeted a further $20 million for the enforceable undertaking it entered into with the financial intelligence agency (AUSTRAC) in 2021 to lift its compliance with anti-money laundering and counter-terrorism financing laws. The independent auditor will provide its final report to the agency in March.

The bank declared a full-year fully franked dividend of $1.69 per share, up 2¢ on last year.

Barrenjoey bank analyst Jonathon Mott said NAB’s results were in line with expectations, but its credit impairment expenses were slightly higher on the back of rising arrears.

Shares in NAB traded 0.9 per cent lower about 2.30pm.

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