The Results: NAB reported FY25 cash earnings of $7.091 billion (down 0.2%) and statutory net profit of $6.759 billion (down 2.9%), both missing analyst expectations. The bank declared a final dividend of 85 cents per share.

The Valuation Problem: NAB shares are trading at 2.1 times book value—a 38% premium to the 10-year average of 1.5x and the most expensive valuation in over a decade. During stress periods, the ratio dropped as low as 0.8x.

Rising Bad Debts: Credit impairment charges jumped 14.4%, primarily from individually assessed charges in the business lending portfolio. While unemployment remains low, cracks are appearing in credit quality.

Margin Pressure: Net interest margin rose 3 basis points to 1.74% overall, but excluding treasury benefits and lower liquid assets, the margin actually declined 1 basis point—reflecting higher deposit costs and wholesale funding costs.

Losing Market Share: Rivals have taken about $5 billion in business loans from NAB over the past year. Home lending through proprietary channels improved to 41% (from 38%), but NAB remains the weakest of the big four in mortgage market share.

When you're trading at your highest valuation in more than a decade, investors expect stellar results to justify the premium.

What they got instead was a reality check.

National Australia Bank posted essentially flat cash earnings on Thursday—$7.091 billion compared to $7.102 billion last year, a decline of 0.2%. Statutory net profit fell 2.9% to $6.759 billion.

Both figures came in below analyst expectations. UBS had forecast $7.17 billion in cash profit. The actual result: $7.09 billion.

Here's the problem: NAB shares are currently priced at around 2.1 times book value—a hefty 38% premium to the bank's 10-year average of 1.5 times, and the most expensive valuation NAB has commanded in over a decade.

"That's quite a price tag for a business facing margin pressure from expected rate cuts and intense competition in home lending," notes Stocks Down Under analyst commentary.

The market is essentially pricing in perfection: modest credit growth, stable margins, and low bad debts. Thursday's results showed none of those assumptions are guaranteed.

Perhaps the most concerning figure buried in the results: credit impairment charges climbed 14.4%, primarily due to higher individually assessed charges within NAB's business lending portfolio.

Translation: More business customers are struggling to repay loans, and NAB is setting aside more money to cover potential defaults.

CEO Andrew Irvine tried to put a positive spin on it, noting that "a number of key asset quality outcomes improved over the six months to 30 September, consistent with a supportive Australian economic environment."

But here's the reality: if bad debts are rising even with unemployment at 4.1% and a........

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