National Australia Bank

The Piotroski F-Score was designed for industrial firms — gross margin, the current ratio and asset turnover are meaningless for a bank whose balance sheet is itself a book of financial assets. In its place we use a nine-point, CAMELS-inspired check spanning capital, asset quality and earnings/funding.

It deliberately captures asset quality (credit risk) — historically the dominant driver of bank failure and otherwise absent from the five scoring pillars. NAB's 5/9 result places it in the "Watch" band: capital, liquidity and core profitability hold firm, but rising non-performing loans (1.55%), a +14% credit-impairment charge, a deteriorating cost-to-income ratio and structural reliance on wholesale funding (deposits fund only 84% of loans) all flag the late-cycle credit and efficiency pressures NAB is navigating.

Measures how fast the bank's income and balance sheet are expanding — operating income, customer deposits and gross loans, year-on-year. NAB scores well: deposits +7.4% and loans +5.9% (Australian business lending +9% with SME market share gains). The drag is operating-income growth at +2.9%, depressed by elevated customer-remediation charges and business disposals.

Captures how efficiently the bank turns its franchise into profit — return on equity, the cost-to-income ratio, and net interest margin. ROE of 11.4% comfortably clears the cost of equity (≈8.8%). The 47.3% cost-to-income ratio is best of the WBC/NAB/ANZ trio but deteriorated 80bp YoY. The 1.74% net interest margin sits just inside the amber band and is structurally below CBA's mortgage-led franchise.

The regulator-facing safety metrics — CET1 capital, the Liquidity Coverage Ratio and the Net Stable Funding Ratio. NAB is fortress-like here: CET1 11.70% (pro forma 12.05% post 1H26 DRP/underwrite), LCR 135% and NSFR 116% all comfortably clear their green thresholds. This is the strongest pillar in the report.

The income case — cash yield plus the franking credits that matter so much to Australian residents and SMSFs. The cash yield is ≈4.5%, grossing up to ≈6.4% fully franked. Payout ratio 73.3% sits inside the 65–75% target — no sustainability caveat triggered. No dividend cut within the prior three years (the 2020 COVID rebasing pre-dates the window).

Whether the shares are cheap or expensive — price against book value, tangible book, earnings, deposits and a dividend-discount model. At A$37.86 NAB trades at 1.86× book and 16.3× cash earnings — fair on a sector view but full versus its own long-run history. The Gordon-growth DDM implies intrinsic value around A$30.5, suggesting roughly 19% downside, the main reason this pillar lands in Caution.

A separate nine-point health check covering capital, asset quality and earnings/funding — the bank-specific replacement for the Piotroski F-Score. It is shown alongside the composite, not blended into it, and it surfaces credit-risk signals the five pillars do not. NAB's "Watch" rating reflects rising non-performing exposures, a +14% credit-impairment charge, and a deteriorating cost-to-income ratio.

Normalisation. Higher-better: score = clamp((v − red_floor) / (green_ceiling − red_floor), 0, 1) × 100. Lower-better: score = clamp((red_ceiling − v) / (red_ceiling − green_floor), 0, 1) × 100. Band metrics (loan growth, payout): full score inside the green band, declining to the red boundaries. DDM: clamp((upside + 0.30) / 0.60, 0, 1) × 100.

Growth (74.2). G1 Op-income +2.9% → (2.9 − 2) / (6 − 2) × 100 = 22.5 (AMBER). G2 Customer deposits +7.4% → 100. G3 Gross loans +5.9% inside the 4–9% green band → 100. Loan growth is ≈1.2× system credit growth (system ≈4.8–5.0%) — well below the 1.5× over-extension trigger, so no asset-quality flag is raised, though Australian business lending (+9%) is above system and B&PB ROE outcomes warrant monitoring.

Profitability (50.0). P1 ROE (cash) 11.4% → (11.4 − 9) / (13 − 9) × 100 = 60.0. P2 CTI 47.32% → (55 − 47.32) / (55 − 45) × 100 = 76.8. P3 NIM 1.74% → (1.74 − 1.70) / (2.00 − 1.70) × 100 = 13.3. Reported on a cash basis; the 1H26 reported cash earnings of A$2,639m includes a A$949m after-tax LNI from accelerated software amortisation policy change — ex-LNI cash earnings of A$3,588m would lift the ROE picture for 1H26 to a comparable ≈11.5%.

Capital & Liquidity (100.0). C1 CET1 11.70% ≥ 11.5% green floor → clamped to 100 (major-bank thresholds: red 10.25 / amber 10.25–11.5 / green 11.5+). C2 LCR 135% ≥ 130% → 100. C3 NSFR 116% ≥ 115% → 100. All three regulatory metrics clear the green-zone thresholds, placing NAB in the strongest capital and liquidity position in this Bank Edition cohort to date.

Dividends (75.5). Cash yield 4.49% → (4.49 − 3) / (5 − 3) × 100 = 74.5; gross (franked) yield = 4.49% × (1 + 1.00 × 0.30 / 0.70) = 6.41% → (6.41 − 4.5) / (7 − 4.5) × 100 = 76.4. Payout 73.3% sits inside the 60–75% green band → no sustainability cap applied. No ordinary-dividend cut within the prior three years; the 2020 COVID rebasing (A$1.66 → A$0.60) pre-dates the 3-year window. Interim 1H26 DPS held at 85c with a 1.5% DRP discount and partial underwrite signalling balance-sheet caution.

Valuation (42.0). P/B 1.86× → (2.0 − 1.86) / (2.0 − 1.3) × 100 = 21.4 (using estimated BVPS A$20.42 from cash ROE × equity reconciliation); P/TBV 2.024× → (2.5 − 2.024) / (2.5 − 1.5) × 100 = 47.6 (NTA per share A$18.71 disclosed in FY25 results); P/E (cash, basic) 16.33× → (18 − 16.33) / (18 − 13) × 100 = 33.4; P/D 0.198× → green (<0.25) → 100, P/A 0.110× → (0.15 − 0.110) / (0.15 − 0.10) × 100 = 80 (V4 avg = 90; P/A band custom-calibrated: green <0.10, amber 0.10–0.15, red >0.15). DDM (V5 = 17.7): r = rf + β × ERP = 4.75% + 0.70 × 5.75% = 8.78%; g = ROE × (1 − payout) = 11.4% × 0.267 = 3.04% (below the ~4–5% GDP cap); D₁ = 1.70 × (1 + g) = A$1.751; V = D₁ / (r − g) = 1.751 / 0.0574 = A$30.51; upside = (30.51 − 37.86) / 37.86 = −19.4% → 17.7. Sensitivity: the value is acutely sensitive to (r − g); g = 2.5% gives V ≈ A$27.75 (−26.7%); g = 3.5% gives V ≈ A$33.32 (−12.0%). The DDM directionally confirms full valuation rather than precise fair value.

Composite. 0.20 × (74.2 + 50.0 + 100.0 + 75.5 + 42.0) = 14.84 + 10.00 + 20.00 + 15.10 + 8.40 = 68.34 → MODERATE. No pillar excluded; no weight redistribution required.

Peer set. Australian major banks — CBA, WBC, ANZ (NAB excluded for its own peer median). CET1 median ≈ 12.3% (CBA 12.3, WBC 12.4, ANZ 12.2 — NAB 11.70 just below); ROE (cash) median ≈ 11% (CBA 13.5, WBC 10.0, ANZ ≈ 9.3 — NAB 11.4 mid-tier); P/B median ≈ 1.9× (CBA ≈ 3.7 inflates the median); P/E median ≈ 17× (CBA ≈ 27, WBC 16.9, ANZ ≈ 13); P/D median ≈ 0.20×. A generic GICS-sector median is inappropriate for banks because business mix (retail vs. institutional vs. wealth) changes benchmark values materially.

Cash vs statutory. ROE, EPS and CTI scored on a cash basis per Australian broker convention; FY25 statutory NPAT A$6,759m (-2.9%) vs cash earnings A$7,091m (-0.2%). The A$332m gap comprises non-cash earnings items (after tax) of -A$303m (including hedge-accounting volatility and divested-business results) and discontinued-operations loss of -A$29m. 1H26 introduces a much larger A$949m after-tax LNI from accelerated software amortisation, widening the cash-statutory wedge materially. 3σ outlier capping: no metric required capping in this report.

Banks publish capital and liquidity metrics only at half-year and full-year results, so NAB's most current CET1, LCR and NSFR readings come from the 1H26 disclosures (31 Mar 2026, reported 4 May 2026) and the FY25 readings (30 Sep 2025, reported 6 Nov 2025). The scored figures use the FY25 closing values for methodological consistency with the FY25 ROE, CTI, NIM and DPS data, with 1H26 readings cited alongside for context (e.g. CET1 1H26 11.65% pro forma 12.05%; LCR 1H26 132%; NSFR 1H26 116%; NIM 1H26 1.81%). Book-value and per-share balance-sheet items follow the same half-yearly cadence — flagged amber for cadence, not as a data-quality issue. Market price, the 10-year bond yield, beta and dividend data are current to 30 June 2026.