National Australia Bank Ltd.

We consider that NAB's creditworthiness benefits from a high likelihood that the Australian government will provide timely financial support to the bank, if needed. The outlook on NAB is stable. We see limited downside to economic risks facing Australian banks in the next two years, including when stronger credit and house price growth resumes on the back of resurgent immigration and limited housing supply. We forecast NAB's credit losses will remain low, at about 15 basis points (bps) of customer loans. Consequently, the bank should maintain sound earnings, supported by rising interest rates. The bank is likely to maintain a strong risk-adjusted capital (RAC) ratio of 10.0%-10.5% over the next two years. We see an upside to our ratings on

...National Australia Bank Ltd.'s (NAB) strong market position and focus on low-risk lending in Australia and New Zealand will continue to support its earnings profile. The bank focuses on retail, SME, and commercial banking. Despite rapid increases in consumer prices and interest rates, we see a solid outlook for the economies of both countries. Unemployment should remain low. NAB's capitalization will remain a strength to its credit profile. Credit losses should remain low and close to pre-pandemic levels over the next two years. In our view, the dependence of NAB and other Australian major banks on domestic and offshore wholesale funding. remains a weakness. This is notwithstanding improvements in the past 10 years across the Australian banking system....

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