Key Takeaways
- National Australia Bank (NAB) reported a Q3 cash profit of A$1.83 billion, maintaining a steady Net Interest Margin (NIM) of 1.8% despite a softening home lending market.
- The a2 Milk Company (A2M) saw full-year net profit plummet 44% to NZ$113.6 million, primarily due to severe supply chain disruptions for its China-label infant formula.
- New Zealand's Services Index (PSI) remained flat at 50.6 in July, indicating a tentative and narrowly based expansion as the sector struggles with weak employment and cautious consumer spending.
- NAB is aggressively targeting productivity savings of over A$450 million for FY26, aiming to keep operating expense growth below the 4.6% seen in the previous fiscal year.
- The Australian home lending market showed signs of cooling in Q3 2026, with NAB reporting a 15% decline in home loan applications compared to the prior quarter.
NAB Navigates Softening Housing Market with Cost Discipline
National Australia Bank (NAB) delivered a resilient third-quarter performance, posting cash earnings of A$1.83 billion. The bank's Common Equity Tier 1 (CET1) ratio stood at a robust 11.9%, while its non-performing exposures-to-GLAS ratio reached 1.50%. Despite these solid figures, the bank noted that the Australian home lending market softened during the period, reflecting broader economic pressures on households.
To counteract revenue headwinds, CEO Andrew Irvine emphasized a rigorous focus on efficiency. The bank remains on track to achieve productivity savings exceeding A$450 million by the end of FY26. Management has committed to keeping FY26 operating expense growth below the 4.6% recorded in FY25, even as it continues to invest in technology and simplification initiatives.
Supply Chain Woes Hit a2 Milk Bottom Line
The a2 Milk Company (A2M) reported a sharp 44% decline in full-year net profit, falling to NZ$113.6 million. The downturn was largely attributed to a 14% drop in China-label infant milk formula (IMF) sales, which fell to NZ$544.3 million. Supply chain bottlenecks and production backlogs left key products out of stock, forcing many customers to migrate to competing brands.
While the statutory figures were disappointing, the company’s underlying NPAT actually rose 7% to NZ$235.8 million when excluding one-off items. Revenue for the year grew 12.4% to NZ$1.97 billion, supported by strong performance in English-label IMF and liquid milk in the U.S. and Australia. Management stated that the supply issues have now been largely resolved, with a focus shifting to winning back market share in China.
New Zealand Services Sector Stagnates
The BNZ-BusinessNZ Performance of Services Index (PSI) held steady at 50.6 in July, matching the previous month's reading. While any figure above 50 indicates expansion, the current level suggests the recovery is tentative and fragile. The employment sub-index remained in contraction at 48.5, marking its 32nd consecutive month below the break-even mark.
Industry analysts noted that the expansion is "narrowly based," with sectors exposed to discretionary spending, such as hospitality, continuing to struggle. High cost-of-living pressures and elevated fuel prices have kept New Zealand consumers cautious. However, when combined with a stronger Performance of Manufacturing Index (PMI), the data suggests annual GDP growth could trend toward 2.0% in the coming months.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.