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Operator: Thank you for standing by, and welcome to the National Australia Bank Full Year 2025 Results Presentation. Go ahead, please.
Sally Mihell: Thank you, operator. Good morning, and thank you for joining us today for NAB's full year 2025 results. I'm Sally Mihell, Head of Investor Relations. I would like to acknowledge the traditional owners of the land from which I join you today, the Gadigal people of the Eora Nation. I'd like to pay respect to the elders past and present and to the elders of the traditional lands from which you join us. Presenting today will be Andrew Irvine, our Group CEO; and Shaun Dooley, our Group CFO. We are also joined in the room by members of NAB's executive team. Following the presentations, there will be an opportunity for analysts and investors to ask questions. I'll now hand to Andrew.
Andrew Irvine: Thank you, Sally, and good morning, everyone. NAB's full year 2025 results reflect a higher underlying profit, supported by strong balance sheet and revenue growth in the second half. Cash earnings and return on equity over the year were broadly stable. We have seen good growth opportunities for our business. Strong balance sheet settings enabled us to increase our Australian business lending balances by 5.8% in the second half. This was the strongest half yearly improvement in 3.5 years and comes as we work to not just defend our leading business banking position but extend it. This was also the first year of implementing our refreshed strategy, which aims to strengthen customer advocacy. Our strategy is generating positive outcomes for customers and for colleagues. To achieve our ambition to be the most customer-centric company in Australia and New Zealand, we must become a simpler, safer and more resilient bank. And to do this, we must simplify our products and processes and continue to modernize our technology in order to take advantage of the AI revolution. We have 3 clear business priorities to drive stronger returns over time: Growing our business banking franchise, driving deposit growth and strengthening proprietary home lending. This year, we have made clear progress against each of these priorities, and I'll discuss them more in more detail shortly. Cash earnings were stable over the year. This was mainly driven by an improvement in underlying profit, offset by higher impairment charges. Revenue growth of 2.9% reflects good volume growth and stronger market and treasury income. However, total costs were impacted by the charges associated with the review and remediation of payroll issues. These issues are disappointing and they must be fixed. Higher impairment charges primarily relate to an increase in individually assessed charges which are not unusual in late in the cycle and can be difficult to predict. Pleasingly, though, we saw a number of key asset quality ratios improve over the second half. Shaun will talk more about the drivers of our financial performance shortly. Our cash return on equity of 11.4% is down slightly relative to 2024. We have declared a final dividend of $0.85, which brings our total dividend for the year to $1.70. This represents 73.3% of cash earnings for the year, which is in line with our target payout policy of 65% to 75% of cash earnings. Balance sheet strength remains a key focus for us and is core to our long-term strategy. Our common equity Tier 1 capital ratio of 11.7% remains comfortably above our target. The pro forma ratio of 11.81% reflects the sale of our remaining 20% interest in MLC Life, which was completed on the 31st of October. There is no change to our practice in recent years of neutralizing the DRP for our dividend. Our total provisioning remained strong at 1.64% of credit risk-weighted assets and our collective provision balance were broadly stable over the second half, but the coverage ratio has decreased to 1.33%, primarily reflecting growth in credit risk-weighted assets. Our liquidity coverage ratio and net stable funding ratio are well above minimum requirements. A continued focus on driving deposit growth has resulted in deposits fully funding our GLA growth this year and the share of total lending funded by customer deposits has increased to 84%. This is a meaningful improvement from 70% in 2019. It's been a good 6 months for revenue performance. This reflects strong volume growth across our priority segments as well as higher margins. A strengthening Australian economy has supported favorable conditions for business credit growth this year. As the largest business lender in Australia, we have seen good opportunities to grow while maintaining discipline on margins. Our strong second half momentum provides a good tailwind to revenue as we head into the first half of 2026. This slide outlines our refreshed strategy announced this time last year. Our ambition is to be the most customer-centric company in Australia and New Zealand. To execute this strategy, we intend to be disciplined and consistent in our focus of doing a few things well at scale and at speed to power exceptional customer experiences. I expect all of our colleagues to contribute to achieving our strategic ambition in the work they do every day for our customers. At our first half results, I spoke about 3 key actions which underpin our ambition to improve customer advocacy. Firstly, we identified 20 must-win battles that represent our customers' most important experiences and interactions with NAB that we simply must do well in. Secondly, we are implementing a more systematic approach to listen, to learn and to act on customer feedback. This involves embedding new operating rhythms across our customer-facing teams to support continuous improvement in customer experiences. These improvements are also supported by investment and prioritization of effort and of resources. Finally, our performance across these interactions is tracked using more granular metrics which drive accountability and alignment. Our ambition to improve customer advocacy is anchored in a belief that this will deliver deeper customer relationships together with improved retention and referrals. All of these should lead to higher growth and sustainable returns over time. And we are already seeing the benefit. Customer feedback loops have been embedded in 20% of the priority frontline teams and 400,000 points of customer feedback have been captured so far. This program has supported improvement of 750 experiences by frontline teams and more than 120 issues have so far been resolved at an enterprise level. Across our 20 must-win battles, 12 have reported improved outcomes. The continued rollout in 2026 is expected to support better customer experiences across all of our must-win battles. Over time, we expect our customer advocacy strategy to drive material improvement in strategic NPS scores, but we're still a long way to go from where we aspire to be. Our mass consumer and business NPS have both improved slightly this half, and I'm also pleased that in our core medium business franchise, we are now ranked the #1 bank. At the same time, I'm disappointed by our performance in high net worth and mass affluent, where we continue to lean in to improve. While our corporate and institutional NPS has been broadly stable this year, we have dropped back to second position. Pleasingly, BNZ continues to be ranked first for consumer NPS and has extended its lead across the 5 major banks in New Zealand. To achieve our customer-centric ambition and to make us a simpler, safer and more resilient bank, we must continue to modernize our technology. This is an ongoing journey, which is embedded in how we run NAB. Since 2018, we've made substantial progress in modernizing components of our technology foundations, and investing in skills and in capabilities. 71% of our technology and enterprise operations workforce are now NAB colleagues, reducing our reliance on third parties. 90% of our apps run on modern infrastructure in the cloud, including 10 product ledgers. We are building on the strong foundations to progressively modernize our legacy customer and colleague systems. For example, we now have a single cloud-based customer master for 90% of BMPB and 84% of our bankers use a single sales platform. To reduce the cost and complexity of migrating to modern systems, we have also been progressively simplifying our products and our processes. Over the past 3 years, including at BNZ, we've cut the number of products we have by 24% with more to come. Our approach to technology modernization is based on progressive, modular and incremental delivery of a long-term road map. This enables us to gradually deliver value to customers and to the business with more efficiency and lower risk. Together with technology, AI solutions and tools are helping us deliver better experiences for customers and for colleagues. We have been using generative and other forms of AI at NAB for many years, but this technology is changing at a rapid pace, and we continue to evolve quickly. As we look to deploy new tools and solutions such as agentic AI to deliver value, we will continue to adopt a business-led approach to ensure the work we are doing is aligned to our strategic ambitions and solves real business challenges. We will continue to use AI safely and responsibly and we'll continue to invest in the key foundational requirements to ensure this. This includes the ongoing cloud migration of our technology infrastructure and of our data. We are also investing in broader AI literacy to equip our colleagues with the skills they need. We are embedding the appropriate risk controls and governance frameworks into our broader planning to keep our customer data safe and ensure transparency of any AI decisions. Importantly, we have identified 4 broad priority areas to focus for Gen AI and agentic AI tools: customers, colleagues, software development and operations. Each of these areas will deliver improved customer experience and provide significant productivity benefits. Our new executive Digital, Data and AI, Pete Steel will join us on November 19. Pete's deep experience in digital and technology solutions will be a valuable addition to NAB's leadership team as we navigate this period of rapid technological change. NAB has 3 clear business priorities, which will help drive stronger sustainable returns. While these priorities are not surprising, they require disciplined execution and ongoing focus. Since launching them, we've made sure everyone at the bank understands their importance and what is needed to deliver. Pleasingly, on each priority, we are making good progress with more to come. The first is continued growth in business banking. Our aim is to be the clear market leader in business and private banking and to pursue disciplined growth in Corporate and Institutional Banking. The second is to continue to drive deposit growth with a focus on transactional account balances. We are investing in innovative payment solutions for business and propositions for our target retail segments including mass affluent and youth. And the third is to strengthen our performance in proprietary home lending. Here, we have implemented a number of initiatives to improve the share of lending through our proprietary channels, while continuing to manage margins and returns across the portfolio. I will now speak to each of these priorities in more detail. Business banking is NAB's heartland, and we know it and our customers well. We are proud to support Australian businesses through our two business banking divisions, which combined make us the largest business lender in Australia. We have a 22% share of total business lending and a 28% share of lending to small and medium-sized business. Our scale has allowed us to invest consistently over many years to support growth with business lending balances increasing 17% over 3 years, including 26% growth from business and private banking. Business banking has generated attractive returns for us, and we continue to focus on managing margins and returns well. We are not surprised that competition has increased but NAB competes from a position of strength. As I said earlier, we are not aiming to just defend our position but to extend it. We continue to see opportunities for growth across both corporate and institutional banking and business and private banking. This includes both divisions working more closely together to better support the needs of medium and large customers. Our new business lending platform is an example of investing to support our growth ambition and making sure our bankers have the right tools and the right capabilities to excel at their jobs. For the past 5 years, we have been building an end-to-end digital business lending platform in Business and Private Banking. Over this period, we have progressively released enhancements such as digital documentation and automated customer reviews. In 2025, we reached an important milestone with the migration of the bulk of the flows of our core secured business lending origination onto a new platform. This is supporting faster, more seamless lending experiences, which means our bankers get to spend more time in market with their customers. Our focus now is to continue to build out the platform, including enhancements for more complex products. Turning to our second priority. We have continued to see strong growth in transaction accounts across both our personal and business banking customers. In Personal Banking, total deposits grew by 9%. Our investment in frontline capabilities and increasing engagement with customers has delivered a 33% increase in transaction accounts opened in branches and a 40% increase in the average balances on those accounts. We are also growing customers in our target use segment with ubank growing by more than 200,000 customers this year to more than 1 million customers across that bank. A consistent focus on growing business deposits has delivered 1.4x system growth over 5 years. In Corporate & Institutional Banking, our investment in innovative payment solutions and improved transaction banking capability has helped us win mandates and grow our transaction banking relationships. Pleasingly, we achieved 14% growth in business transaction account balances across both of our business divisions in 2025. NAB's home lending strategy aims to serve our customers well in the channel of their choice through the delivery of a seamless customer and broker experience. Australian Home Lending is an intensely competitive market, which makes it essential that we manage our returns through a disciplined approach. And this includes strengthening our performance in proprietary home loan origination. Since the first half of 2024, we have achieved a 46% increase in proprietary drawdowns. This is significant and shows our approach is working. We're optimistic we can further improve this mix, supported by investments to improve banker productivity and the hiring of new bankers to uplift capability. I'll now pass to Shaun, who will take you through the financial results in more detail.
Shaun Dooley: Thanks, Andrew, and good morning, everyone. If I could please direct you to Slide 21. Our underlying profit rose 0.7% this half, reflecting strong underlying revenue growth as highlighted by Andrew. This was offset by softer markets and treasury income and higher costs, which rose 5% and including the payroll review and remediation. Cash earnings decreased 2.1% with underlying profit growth more than offset by higher credit impairment charges. And statutory profit was down 1.6%, similar to cash earnings with the gap to cash earnings, mainly reflecting noncash costs relating to the Citi integration. As set out on Slide 22, all our Australian divisions reported higher underlying profit growth, both over the year and also half-on-half supported by good volume and revenue momentum in the second half. Personal Banking had the standout growth this period with a 14.7% lift in underlying profit half-on-half. Revenue growth strengthened over the second half with improved volume momentum and better margin performance. Personal Banking held costs broadly flat with the productivity benefits offsetting investments in our franchise, which Andrew outlined earlier. Our Business Banking divisions also performed well over the second half with underlying profit up around 4% for both. Similar to Personal Banking, this has been revenue-driven with accelerating volume growth half-on-half and good margin outcomes. In Business and Private Banking case, this volume momentum includes a pickup in agri lending after a softer performance in the first half, along with the typical seasonal bias to growth in the second half. In the case of Corporate & Institutional Banking, the slower growth over the second half compared with the year reflects stronger markets income and lower costs year-on-year. Corporate & Institutional Banking continues to manage costs with discipline and is benefiting from ongoing simplification of its business. While New Zealand Banking performance was broadly lower over both periods, the business did well to hold revenue broadly stable despite a continued challenging economic environment, and this was more than offset by higher technology-related costs. Turning to revenue set out on Slide 23. This rose 2.7% and reflects a pickup in volume growth and improved margins. Markets & Treasury income was a drag of $124 million over the half after a strong first half performance. The second half includes the nonrepeat of a $54 million gain on insignia notes relating to the disposal of our wealth business, along with less favorable interest rate positioning. Excluding markets and treasury, revenue was 4.3% higher. Volume growth was pleasing, contributing $203 million and aligned with our strategic priorities, as Andrew highlighted. We had strong growth in business lending across both Business and Private Bank and Corporate & Institutional Bank, along with good housing lending growth. Higher margins contributed $216 million following a decline in the first half, and I will discuss this in more detail shortly. Fees and commissions were $9 million higher, a relatively subdued outcome. Strong volume growth and lower customer remediation was offset by lower business lending fees in the Business and Private Bank as we work through a period of reviewing our practices for charging fees. There have also been some lower capital markets and structuring and underwriting fees in Corporate and Institutional Banking this period. The other category is down $27 million and reflects a series of small items, including the impact of MLC Life, which was moved to the held-for-sale treatment from December 2024. Now moving to net interest margin, which is set out on Slide 24. Our NIM increased 8 basis points over the half, a pleasing performance. Excluding markets and treasury and the benefit of lower liquids, which are both largely revenue neutral this half, our net interest margin rose 4 basis points. Lending margin was flat, again, comprising a series of small movements across the portfolio. Overall, the impact of home lending was new to this period with a 1 basis point decrease from competition in Australia, offset by a benefit in New Zealand. Business lending was a drag of 1 basis point, consistent with the first half and reflects good margin management by Business and Private Banking in a competitive environment. Funding added 1 basis point relating to lower short-term costs. And excluding the impact of the replicating portfolio, deposits were 1 basis point lower. And this comprises a number of small impacts. Deposit costs were slightly higher, primarily relating to competition in New Zealand, and there were small impacts from cash rate cuts partly offset by some pricing adjustments. Mix was also a small drag reflecting ongoing growth in the proportion of deposits in higher rate at call accounts, partly offset by a lower proportion in term deposits. The overall impact from higher returns in our deposit and capital replicating portfolios has been 4 basis points this half. Approximately 1 basis point relates to our capital hedge, which is lower than recent halves as the benefit of higher rates in this 3-year portfolio fades. And the remainder relates to our deposit hedge, which is a 5-year portfolio. Turning to the outlook for the first half of 2026 in respect of margins. We've included a broad outline of some key considerations. Firstly, further tailwinds from our replicating portfolios in Australia and New Zealand are estimated at approximately 2 basis points based on the swap rates and volumes at the 30th of September this year. Secondly, the impact of the 25 basis point RBA cash rate cut on Australian unhedged low rate incentive deposits is unchanged at approximately 1 basis point annualized. And Bills-OIS Spread have been fairly stable since September after a period of volatility. How this plays out over the first half of 2026 will have an impact on funding cost but is difficult to predict. Every 7 basis point move in this spread impacts our NIM by approximately 1 basis point annualized. And while there may be some further tailwinds from liquids, including the full period impact of the lower liquid asset mix in the second half, this is neutral to revenue. Now moving to operating expenses, which is set out on Slide 25. These grew 4.6% over financial year '25, in line with the guidance that we provided in our third quarter trading update or 3.2% ex the payroll review and remediation costs. Salary-related cost growth was $267 million. The majority of this reflects the impact of pay rises under our Australian enterprise agreement from January 2025 and associated costs like super and payroll tax. There've also been a series of individually small impacts, including pay rises in New Zealand, India and Vietnam and out-of-cycle increases in Australia. Volume-related costs rose $143 million, and this includes investments in frontline bankers, growth initiatives across all of our customer-facing divisions in order to support our key priorities, which Andrew has outlined. The biggest uplift was in Personal Banking, including the addition of new proprietary home lenders. Technology and investment spend rose to $113 million. Key drivers include additional licensing and support costs, higher cloud usage, higher technology-related spend to support delivery of a number of key strategic initiatives. Investment spend was also higher, reflecting a $150 million increase in the total level of investment to around $1.8 billion over the year and a fairly stable OpEx ratio of 38%. Productivity savings were $420 million achieved through continued process improvement and simplification, including operational and technology efficiencies as well as synergies associated with the Citi. Other rose $131 million, and this includes higher financial crime-related costs, partly offset by lower restructuring related costs. EU-related costs were $71 million lower this period with the team having completed the delivery of the required activities in the first half. But this has also been more than offset by payroll review and remediation charges of $130 million. Looking across FY '26, we expect a slower rate of cost growth compared with what we saw in FY '25. A couple of considerations. Our expectation for investment spend remains approximately $1.8 billion. The payroll review and remediation program is ongoing, but at this stage, the cost impact in FY '26 remains uncertain, and we are targeting productivity benefits of greater than $450 million. Now turning to asset quality set out on Slide 26. As we move through the economic cycle, our book has continued to perform as we expected. We typically see asset quality trends lag economic cycles and retail tends to improve ahead of business. Asset quality outcomes this half include some positive signs that we may be approaching the end of this cycle and consistent with the improving economic environment here in Australia. While the ratio of nonperforming loans to gross loans and acceptances increased by 6 basis points in the second half, the pace of increase has slowed compared with recent half years. The increase in this period all relates to the impaired asset ratio, which rose 7 basis points, primarily due to a small number of business lending customers in Corporate & Institutional Banking and New Zealand. And while single name exposures are lumpy, and they're hard to predict, it's not unusual to see some increase in impairments towards the end of an asset quality cycle. The default but not impaired ratio reduced 1 basis points, driven by lower Australian home lending arrears in the second half. And this is the first half year reduction we have seen in this ratio since the second half of 2022. Watch loans are also lower over the period. They're down 9 basis points, and this is the first half yearly reduction we've seen here since the first half of 2023. Credit impairment charges increased over the half to $485 million, representing 12 basis points of GLAs. Consistent with the underlying asset quality trends, this reflects higher individually assessed provision charges, offset by a collective provision write-back. The individually assessed provision charge of $574 million comprises a broadly consistent level of charges for unsecured personal lending, a handful of large single name exposures in corporate and institutional banking and New Zealand Banking and increased charges for the business lending portfolio in business and private banking. There were no underlying collective charges this period with volume growth and reducing asset quality impacts offset by transfers to individual provisions. And there has also been a net release of $89 million from forward-looking collective provisions. I'd like to turn to the key asset quality trends that we are seeing in our Business and Private Bank's Business Lending portfolio, and these are set out in Slide 27. And this portfolio has been a key driver of group asset quality in recent times. Pleasingly, we've seen some encouraging underlying outcomes this period, which suggests this portfolio may be in the early stages of stabilizing to improving asset quality trends. In the past 6 months, the NPL ratio increased 18 basis points, but this is a slower pace than we've seen in recent halves. Performance this period has been impacted by two large well-secured customers in our agri book, which have driven an increase in the default but not impaired ratio. Excluding these two names, the nonperforming loan ratio would have declined 3 basis points. We are also seeing stable to improving nonperforming loan trends across most sectors in the second half, consistent with an improving economic environment. And this is in contrast to recent periods where deterioration in nonperforming loans was far more broad-based across our book given general cash flow challenges. This portfolio is well diversified and highly secured with prudent provisioning. Despite strong lending growth in recent periods, the risk profile of our performing book has remained stable. In common with the group ratio, Business and Private Bank's business lending nonperforming loan ratio remains dominated by default but not impaired exposures where we do not expect to incur actual losses. Our approach over a long period has been to work with our customers through difficulties. And while this can take time, our experience is this achieves the best overall results for our customers and our shareholders. If we could now please go to provisions on Slide 28. Total provisions have increased modestly over the half and represent 1.6x our base case and 1.64% of credit risk-weighted assets. General movements within the key components of total provisions are typical of what we would expect at this point in the cycle. Individually assessed provision balances have increased to $1.163 billion, up from $920 million at March. And the increase mainly relates to higher business lending impairments, including a small number of customers in Corporate & Institutional Banking and New Zealand Banking. Collective provisions were broadly stable at $5 billion at September, and this represents 1.33% of credit risk-weighted assets which are 9 basis points lower than the March 2025 number and due mainly to growth in credit risk-weighted assets. There were only very minor movements in the key components of the collective provision this period. There was a small $89 million net release from forward-looking provisions, reflecting lower target sector forward-looking adjustments as the outlook for several sectors has improved. And this was offset by an increase in the economic adjustment for refreshed scenarios. At $1.6 billion, forward-looking provisions have been maintained at prudent levels at this point in the cycle, including a 42.5% weighting to the downside economic scenario. Underlying collective provisions are fairly stable with volume growth and the slowing in the pace of asset quality deterioration offset by transfers to individual provisions. Now turning to capital on Slide 29. Our group CET1 ratio stands at 11.7%, down 31 basis points from March 2025, and our Level 1 ratio was 11.6%. Cash earnings added 82 basis points this half, partly offset by 61 basis points for the payment of the interim dividend. Credit risk-weighted asset moves reduced the CET1 ratio by 45 basis points, mainly reflecting business lending volume growth and an overlay of $4.8 billion related to the measurement of off-balance sheet exposures. Other risk-weighted assets includes an increase in the capital floor adjustment this period, equivalent to 3 basis points of common equity Tier 1. Other was an 8 basis point negative impact, and this comprises a number of items, including FX and noncash expenses, and these can be volatile from period to period. Adjusting for the sale of MLC Life, which has now been completed, our pro forma CET1 ratio was 11.81% or 11.68% at Level 1 and both are comfortably above our target of greater than 11.25%. Liquidity and funding is set out on Slide 30. The quarterly average LCR is 4 percentage points lower over the half at 135%, well above the 100% minimum requirement. We continue to manage liquidity prudently in order to be well placed for any potential market volatility. Consistent with the LCR outcome, our NSFR ratio decreased 3% to 116%. We issued $16 billion of term wholesale funding during the second half, and this brings the total for the year to $36 billion. And this has supported repayment of maturities as well as balance sheet growth. And we continue to expect issuance across FY '26 to be at broadly similar levels to recent years. On that note, I'll now hand back to Andrew.
Andrew Irvine: Thank you, Shaun. Australian economic growth has continued to improve and is gradually returning to trend rate growth levels. Real GDP is forecast to improve to 2% over 2025 and to 2.3% over 2026. Household incomes are benefiting from moderating inflation and cash rate cuts delivered in February, May and August of this year. We expect monetary policy to remain on hold at 3.6% for a while with further cash rate reductions not expected until May of next year. Our recent quarterly business survey shows business confidence and business conditions have continued to improve through 2025 and are now in positive territory for the first time since 2022. Lead indicators point to ongoing momentum. This outlook is expected to support robust credit growth with business credit forecast to grow by 7.5% in '26, slightly ahead of housing credit growth of 6%. Looking ahead to 2026, we will continue to execute our strategy to deliver improved customer advocacy, speed and simplification. This will be supported by ongoing technology modernization and AI solutions. We remain focused on delivering progress in our 3 priorities of growing business banking, of driving deposit growth and of strengthening proprietary home lending. There is no change to our disciplined approach to managing costs and driving persistent productivity. This is important to provide headroom for the investment required to support execution of our strategy. We will retain prudent balance sheet settings as this allows us to continue to grow and support our customers. This year, we successfully migrated 2 cohorts of Citi white label customers onto our modern unsecured lending platform. We remain on track to complete this migration by December of this year. NAB enters 2026 with strong momentum across our bank, a consistent strategy and an experienced and disciplined leadership team that is executing well. This, together with our business mix and the progress we've made in our 3 priorities, gives me confidence we can continue to deliver and grab the opportunities that will present in a more supportive economic environment. Thank you again for your time, and I'll now hand back to Sally for Q&A.
Sally Mihell: Thank you, Andrew. We'll now take questions from analysts and investors. When it's your turn, the operator will introduce you and please limit yourself to no more than two questions. Please go ahead, operator.
Operator: [Operator Instructions] Your first question is from Jonathan Mott with Barrenjoey.
Jonathan Mott: Can I ask a question on Slide 29, that Shaun, you were just running through the capital and emerging parts there. And I just wanted to add to that, the view for credit growth remaining strong. So I think you were saying that you want to see business credit growth at a system level of 7.5% housing at 6% next year and winning market share. So it assumes very strong growth continuing. If you look at the moving parts in the second half, you were utilizing a vast majority of your earnings to pay the dividend and risk-weighted assets continuing to grow the CET1 going backwards pretty quickly. And if you also look at the leverage ratio, which fell further to 4.92% and you've gone through the floor on the credit risk-weighted assets. So effectively, it can't use models to offset some of the credit-risk-related asset growth. So what do you think about how you plan for capital and how you plan for dividend into next year? Will you need to turn the DRP back on and not neutralize it? Or will the dividend come under pressure just given the strong volume growth that you're anticipating?
Shaun Dooley: Thanks, Jon, for the question. And I'll take a couple of those points in a particular order, if I can. Firstly, on the DRP, we continue to neutralize that, and there's no change in our approach on the DRP. In terms of the leverage ratio, you've called that out. I mean we're still well above where we need to be on leverage ratio. And we as a bank are pretty well inside those expectations. If I think about the capital ratio and what's happened this year, a lot of that consumption in capital has been credit RWA, and we think that's a good use of capital. That sets us up in terms of the future in terms of earnings. It's reflecting the good growth that we're getting in the business. So you'd expect that to turn up in our numbers. There's also a models and methodology component of that as we've called that out and we called that out in the third quarter. That's a number that moves around over time. And if you think back to a year ago, we had some pretty strong capital contribution coming out of releases of models and methodology. So it's a number that moves from half to half. But I think you should think about our capital management around advanced and standardized it being around where we're at, at the moment. You mentioned the floor were 3 basis points further into the floor than we were at the half. But we'll tend to oscillate around where the floor is. And we think that's appropriate for a bank like ours. It's really an outcome of the optimization.
Jonathan Mott: Just a question on the dividend because with very strong credit growth continuing, you're going to be utilizing a lot of capital. Are you happy to see CET1 ratio to continue to fall next year, which looks likely if you maintain your dividend at the current level?
Shaun Dooley: Yes. We'll be looking to maintain strength in our CET1 ratio. When we consider the dividend we look at the interplay between risk-weighted asset growth and the returns, and that helps us set what our dividend payout ratio is, and that's ultimately a decision for the Board. But comfortable where we're at this point, it's inside our target range. And as I said, I think the growth in the RWA is going to turn up in earnings in next year.
Operator: Your next question comes from Andrew Lyons with Jefferies.
Andrew Lyons: Just a question on your NIM. At the third quarter trading update, you reported an 8 basis point rise in reported NIMs on the first half '25 average or 4 bps, excluding markets and treasury. Today's results suggest that the fourth quarter was therefore broadly flat. On the third quarter outcome, would you firstly say that that's a fair characterization of the situation? And perhaps just in light of that, can you just talk about the competitive environment. There's obviously a lot made of the competitive environment in business lending. But can you maybe just talk to how that's evolved over the half and into the first half of '26, please?
Andrew Irvine: Andrew, it's Andrew Irvine. I'll take the point. I'd say, first of all, a characterization of what happened in the fourth quarter is accurate. So that we saw stable margins in the fourth quarter. And I'll tell you that was really pleasing. To have a -- if I take business banking as a segment, to be -- increasing market share in a highly competitive environment and maintain strong margin performance at the same time shows a business that's executing well, and I think we thread the needle really well in that last half. And pleasingly, I'm optimistic that, that will continue. We know competitors are coming into this space and competitive intensity is increasing, but we've got strong relationships. We know this business well. And Andrew has come in and him and his team are executing well. So that gives me real confidence for the future.
Andrew Lyons: Great. And then just a second question really following up on what Jon just asked around capital, and it's really just around the mechanism of your capital target. Your CET1 reported at 11.7% or 11.8% adjusting to the MLC sale that would appear to be below your greater than 11.25% target if you adjust the dividend, which reduces your ratio by 60 basis points. So just in light of that, how should we think about your CET1 ratio target? Are you aiming to be greater than 11.25% at all stages of the year or only on the 31st of March and the 30th of September when you report results?
Andrew Irvine: We're aiming to be above that at all stages. So I think that's why we set the minimum capital target to make that very clear. We intend to be above that at all times.
Andrew Lyons: So you're saying that you've had enough capital accretion between now and when you go ex dividend such that less 60 basis points on the reported number of 11.7%, you'll still be above 11.25%.
Andrew Irvine: That's correct.
Operator: Your next question comes from Victor German with Macquarie.
Victor German: Yes. I was hoping to get a little bit more color on business bank margin and fees. From your divisional analysis, it looks like overall business margins are flat, as Andrew alluded, but it's partly due to the benefit from replicating portfolio and lower liquids. When it comes from -- to lending margins specifically, what trends are you seeing? And lending margins declining? Or is the decline moderating or accelerating? Just a little bit more color on that and what it means for 2026 margins in that space? And then my second -- do you want me to ask the second question now or wait?
Andrew Irvine: Yes please, Victor.
Victor German: Yes. And the second question is, obviously, competition can come from both margins and fees. And if we look at your disclosure on fees, it looks that there are some pressures emerging. So just a little bit more color on that, if possible. And how significant are those fee pressures when we're thinking about sort of going into 2026? Should we be taking your second half fee line as a base? Or are there other considerations for that noninterest income line?
Andrew Irvine: Victor, I'll just give a headline update, and then I'll let Shaun answer your two questions in more detail. But I would say in terms of market intensity and the pressure on margins, I would say it continued, but it didn't accelerate or even decelerate. It was consistent across what we've seen over the last few halves. Competitors are coming into this market, and they're seeking to grow. As I said, I'm really pleased with how our team has executed in that context. We're holding on to our customers. We're growing with our customers. 70% of our loan growth was with existing customers. So we're retaining our bankers. We're managing this business very well. And I think that bodes well for 2026. And we're winning by not giving it away on price, which I think is really, really important. There are some things that we're working through on the fee side, and I'll let Shaun go into that now.
Shaun Dooley: Yes. And I think -- and also to add a comment on the margin. As Andrew talked about, the disciplined margin management has really been supported by new tools that we've been bringing into the business, and that's given us better transparency and more sophistication around our pricing. And I think that's showing up as well in the way that we're managing margin. We continue to sort of invest in the service offering that we provide to our clients. And overall, I think we've been managing that very well, and it's shown up in that margin volume sort of trade-off. In terms of the fees and commissions, Victor, yes, look, it is a disappointing line for us, but there are a couple of things to take into account. Firstly, it includes the impact of some business restructures and closures that we've had. So firstly, the asset servicing business is one contributor to that. We've also had some customer remediation that is treated as a negative against that line and that can be a bit volatile and lumpy. And then you referred to the review of collection practices. Yes, it is true that there's some aspects of our business fees that we've had a good look at. We're working through those at the moment, and we think we'll have those result at some point. That's where we're at on that one. But what I would say is the underlying fees are growing broadly in line with the activity. And I think there are also some pointers there around the increase in credit card-related fees that we're seeing. So yes, it's been disappointing, but it's an area that's actually getting a lot of focus from Andrew and the management team.
Victor German: Sorry, Shaun, maybe just to make sure that we get this right. So if we look at second half noninterest income, excluding markets, which obviously is volatile and moves around from interest income to noninterest income. And that core line, it sounds like you're suggesting that there were some issues in the second half, which were potentially a one-off and shouldn't necessarily be kind of implied going into 2026? Or is that kind of baseline the right line to grow from as we think about the future?
Shaun Dooley: I think there are a couple of factors. There are some one-offs in that second half, but we will still want to continue to grow that line into the second half, but there are some one-offs in the second half.
Andrew Irvine: Yes, we've got to work through those one-offs. But generally speaking, you would want to see fees and commissions growing in line with balances over time.
Operator: Your next question comes from Richard Wiles with Morgan Stanley.
Richard Wiles: Andrew, can you talk to us a little bit more about transaction accounts? In your prepared comments, you referred to the growth in new transaction accounts through the branch network. But perhaps if you can talk to a transaction account balanced growth generally, how is the split between sort of offset accounts and other more valuable low-cost transaction accounts and also how is the split between Personal Banking and B&PB, please?
Andrew Irvine: We'll do and, Shaun, back me up if I miss anything. Look, I would say this is probably one of the standout metrics in our year, and we saw acceleration in the second half. And all of our businesses are doing well in deposit gathering with a focus on transactional account balances. We've been clear that this was an opportunity for our bank that we've been working on year in, year out for the last 5 years. And we've been growing materially above system in our business franchise at 1.4x system consistently year in and year out. And again, I think this year, we were the only major bank in business banking across both of our businesses to actually increase share. What I particularly like about our result this year is that TD volumes were pretty flat year-over-year, and that all the growth that we delivered this year was in higher value balances, particularly transactional balances. And that reflects the delivery of hard work to improve our propositions across all of our businesses. In Personal Banking, we've worked really, really hard to bring back to life origination in our core branch footprint, which I think had dropped off, and we had, in the past, been focusing on digital origination. And so branch activation and branch origination has really taken off under Anne and her team's leadership. And that's something that we're really pleased to see because the quality of those accounts are high. In Business and Private Banking and in CIB, we've been focusing on improving propositions and solutions and innovating on things like account-to-account payments and Portal Pay, our new rent roll solution that is driving high-quality deposits to the bank. Really pleasingly, too, we've won more than half of the mandates that have come to market in the large end of town in terms of transactional mandates. And so we've got a proposition now that is showing that it's differentiated from peers. And that's also really pleasing. So this is a culmination of a lot of hard work over a number of years, and hopefully, it sets us up well to continue to fund our GLA growth in future years and to improve the mix of the quality of our deposit portfolio to transactional.
Richard Wiles: Okay. So a lot of good trends there, Andrew. In Personal Banking in the division, deposits were up 9% for the year. Can you tell us what was the growth in sort of transaction accounts or obviously wasn't TD driven, was the growth driven in transaction accounts or was it more savings accounts?
Shaun Dooley: Yes. So we've got some detail on Slide 79 in the pack there, and you can see the breakdown by each of the divisions. And as Andrew said, we're really pleased with it, but with both the mix and the underlying growth that's occurring. And you can see in Personal Banking, in terms of transaction and BIS, they've been up a little bit from last year, but we've also seen good growth in savings accounts, and we've seen growth in offsets, which has also been a feature there. But good growth overall across that division and broad-based.
Operator: Your next question comes from Ed Henning with CLSA.
Ed Henning: Just the first one on expenses. You've called out expense growth below the 4.6% this year. This year included $130 million of hopefully, a one-off or hopefully be a little bit less next year going forward. You've also called out higher productivity. You've also called out investment spend flat where it was up $150 million last year. Just why aren't you saying below 3.2%, which was your underlying growth or a number below that 4.6%? What are you seeing coming through your cost line with a lot of the numbers going down or flat on last year that you're seeing coming through your expense line for '26?
Shaun Dooley: Yes. Thanks, Ed. It's Shaun here. I'll take that one. So yes, you've called out some of the key drivers in our operating expense line this year. And if we think about next year, as you've called out, we expect greater productivity to come through. We'll see some moderation of some of the financial crime headwinds that we've seen in recent years. And then you also touched on the payroll number as well. There are a couple of things that we'll continue to think about. It's obviously volume-related costs will persist. We've increased the number of bankers that we've got facing into our customers, and that's really a good cost for us in terms of the returns that it should generate. So you would expect some of that to persist into next year. The technology spend, as you called out, is up on year-on-year, but we'll be expected to be stable into next year. We'll see depreciation and amortization continue to be an ongoing headwind. And as some of our platforms come online, particularly the new unsecured platform, you'll start to see amortization come through from there. But I think what we are trying to say is that our costs will moderate from this year. We're not trying to put a target. We don't put a target there, either a cost-to-income ratio or both absolute or relative, we're just giving the general sense of where you should think about the expense numbers landing.
Ed Henning: But just to clarify, like your underlying growth was 3.2%, you're saying below 4.6% but yet a number of the moving parts from last year won't continue for next year, it won't be at the same level. So it seems like it's better and better than 3.2%, but yet you're saying below 4.6%?
Shaun Dooley: We look at the underlying as being 3.2% ex the payroll review. I mean if you look at that waterfall chart, you've got the E/U there of 71, you wouldn't expect that to necessarily repeat as well. But I think what we're trying to do is sort of help you think about what you might put into your assumptions rather than necessarily give you a number. We're trying to give you a sense of what those potential drivers might be relative to this year.
Ed Henning: Okay. That's great. And just a second one quickly on the margin. Can you just talk about some of the moving parts a little bit more? You talked about the deposit hedge is now up to for next half, but it was up 3% in the half just gone. Why that's falling away when you've still got that 5-year hedge rolling through? And then also, if you look at what you talked about proprietary still going strong and hopefully grow that. So the lending should be a bit better there. You grew investor lending, credit cards are up. Can you just talk a little bit more on the lending side as well just some of those moving parts rolling into first half '26, please?
Shaun Dooley: Yes. So we'll start with the lending margin. So it really reflects a whole series of small movements, and that's been pretty consistent with what you've seen in prior halves. And I think that's what we've tried to show in the slide. The overall impact from home lending was pretty flat with a small headwind from competition in Australia, which was offset by a tailwind in New Zealand. Our business lending margin was also up about 1 point consistent with -- was about 1 point, sorry, not consistent with recent halves. And then the other was a small tailwind from repricing in unsecured lending. And I think that's an important one as well. So the lending margin has really been a feature of lots of small sort of drivers, and I don't think you'd expect that to change much going to next year other than taking into account the fact that we've got a very competitive environment that will continue to present some headwinds. There will be some tailwinds this half, that may not repeat into next year in New Zealand, particularly if I kept going through the waterfall on deposits, I think we've sort of covered that in terms of the number of drivers. Again, very small movements, some drags from mixed costs and cash rate cuts coming through, and they've been offset by some benefits in our consumer savings books. But in terms of the outlook, it's really going to be driven by both interest rates and competitive environment. But given we've got expectations of a pretty stable rate environment in the first half I wouldn't expect to see much change in the overall drivers of deposit.
Andrew Irvine: I might just add. We don't know what the uncontrollable items are going to be as we go forward. But I can tell you that on the controllable items, we're going to be continuing to manage the business well. So pricing discipline in our business franchises, both C&I and B&PB, you should expect that to continue. It's back to the 3 priorities that we've outlined. We're going to continue to focus on being a better deposit gatherer with a skew to high-quality transactional accounts over the course of the year and we're going to keep working hard to improve the penetration of proprietary home lending, which is 20% to 30% better returning than the broker book. And so if we do those 3 things continuously well, we'll be doing the best job we can at controlling the things that we can control.
Operator: Your next question comes from Andrew Triggs with JPMorgan.
Andrew Triggs: Just a first question on asset quality. Obviously, you're starting to see a turn in the broader book trends, but you did see a number of single names. Is there anything you can sort of like very granular in the book that you can sort of point to that gives us a bit more insight in predicting those sort of 2 bookends around asset quality. I note there's -- the typical product -- sorry, probability of topside in the business book towards the back shows the ratio above I think 2.5% was pretty stable half-on-half. But there anything you can sort of give us -- it gives you a little bit more insight on comfort that you won't get the same extent of individual provision issues into the next half?
Andrew Irvine: Look, let me -- it's Andrew here, Andrew. I'll take just a high-level view on how we're seeing things, and then I'll hand it to Shaun to address the more detailed component of your question. So we were clear and guided that we thought second half of this year would be the peak of the asset quality cycle, and we think that, that's occurring as we would have expected it to occur. We're optimistic that given the improvement in the economic environment and improved cash flow position of our customers, that over the course of next year, delinquency is going to improve from here on in. What we don't know is what's going to happen on impairment and in a late-stage economic cycle, single name exposures can pop or not pop. And so that's one thing that we're going to have to continue to pay attention to. But we're optimistic that delinquency and the overall health of the portfolio is going to improve next year. We'll just have to wait and see how the impairment experience translates at the same time. I don't know, Shaun, if you...
Shaun Dooley: Yes. Thanks. I'll probably add a couple of things. Firstly, we can't predict what will happen on individual impairments, right? That's the nature of the business. So -- and they will, by their very nature, be somewhat lumpy, right? So -- but as I said in earlier comments, this is indicative of what you'd expect to see in the late stage of the cycle. And we've seen that transition come out of the collective provision into the individual SAS provision. There are a couple of points I'd probably add. Slide 27, we've got that breakdown on the nonperforming loan exposures as a percentage of EAD by each of the regulatory industry categories. And this lines up with the 330 reports. But you can see there that there's probably 5 sectors that have seen an increase in the NPL ratio over the half. The same chart 6 months ago showed nearly every sector deteriorating. And so we're seeing that 2 of my earlier comments, improving all stable trends in a lot of the sectors that we're dealing with. So that is encouraging. We talked about the fact that what lines have declined, the default nonimpaired ratio had declined. The economic conditions to support where we're at the long-run loss rate that we've had over the last 20 years is about 13 basis points where the portfolio is performing as we thought it would and as we have said previously. So I think with improving economic conditions, business confidence and so on and our level of provision, we feel okay about where we're at.
Andrew Triggs: And Andrew, just a second question around I guess, customer franchise metrics. Pleasing to see some reasonably good momentum on MPS across the key target segments. MFI doesn't generally appear in your pack and doesn't therefore, seem to be as intense an area of focus or strategy of some of your competitors. Can you talk to where you think you are at on MFI trends and maybe segment that across consumer and SME?
Andrew Irvine: Look, MFI is one of many metrics that we use to manage our business. And so it's something that we're watching, and we want to be the main bank for our customers in all of our businesses: Personal Banking, Business Banking and Corporate and Institutional. We measure things like bank of choice where you have what proportion of your customers in your personal and business bank are transacting through you, they're depositing their paycheck in your account, and they're doing debits and credits. And those metrics are all moving in the right direction for us, and that's something we manage on a weekly basis. And same is true in business and private banking, you wouldn't be getting the transactional account balances if you weren't becoming the main bank for your customers. And so I think the metric that gives me good confidence is 14% increase in transactional account balances in our commercial franchise. De facto means we're becoming more of a main bank for our customers, and they're using our systems and services. So they are the things that we're looking at. Maybe we'll take away the point around MFI disclosure, but it's one of many metrics that we use to run our business.
Operator: Your next question is from Brian Johnson with MST.
Brian Johnson: As I'm looking at the screen, your share price is down about 2.5% in a market that is up on a small earnings miss. And if we kind of listen to the nature of the questions today are a lot about the capital and the dividend sustainability. I just -- and so it's up to you guys whether you answer this quite clearly or not. But if we take the core equity Tier 1 ratio at 11.7%, take out the dividend of $59 million, add back the sale of the life business, which is $11 million, you get to a notional ex dividend number of 11.21%, which is below the 11.25%. And you can say, we've got 3 months to earn it, but that's the reality of where you are today. So the question I've got relates to Slide 29. And Shaun, you've mentioned it, but I don't think you've really addressed it. But if we probably have a look at one of the things that really dragged on your capital ratio during the period, it's basically -- it's a very small note #4, which is this $4.8 billion change in the risk-weighted overlay in respect of some methodology. So I reckon that costs around 12 basis points, which is pretty significant in the scheme of things. So could we find out is this an overlay that reverses really quickly? Or what are the things that drive it up or down? Or does it just -- would this change in methodology, does it just grow in line with the risk-weighted assets? And how is it impacted relative to the capital floor?
Shaun Dooley: Yes. Thanks, Brian. So firstly, on the $4.8 billion overlay, overlays by their very nature, generally temporary and address areas that we might identify in the calculation of our RWAs or there might be an outcome of discussions that we've had with our regulators and so on. And it's got a volatile number, and you've seen that move around over time. When we put an overlay in place, we generally look to get a resolution on that overlay within a reasonable period of time. Generally, it requires either a technology fix or something like that, but we're actively working on addressing those at the moment.
Andrew Irvine: So look, we're working on that one to be able to eradicate that overlay and there's real work involved in doing that. And we have other optimization levers that we continue to pursue all the time to refine and reduce overlays and adjustments to how we think about RWAs and capital generation. So while the quick math that you shared was correct, we are confident that over the course of next year, our capital position will improve, that will generate strong earnings from the RWA growth that we delivered this year and will continue to deliver in next year. And we're confident here.
Shaun Dooley: Yes. And what I'd also add to that, Brian, is as the Board approves our dividend, they do it in full consideration through the management recommendations on the outlook for both RWA consumption and on revenue. So we strike our dividend with a forward-looking view.
Brian Johnson: Can I go back though? So this $4.8 billion in the outlook, you've got it reversing, could we get a feeling as to how quickly you think it reverses?
Andrew Irvine: I wouldn't like to commit a time on that one, Brian. I don't think -- that wouldn't be appropriate for us to lock in on a time. We will with all of our risk-weighted asset calculations continue to work on improving those, making sure that we're holding the right amount of capital, but I wouldn't want to be committing to a date on that.
Brian Johnson: Okay. And then the second question, if I may. Recently, Andrew, you've come out with a statement with an aspiration on basically resi property development. Having followed NAB for a number of years, when NAB was historically kind of blown up is when it has had too much commercial real estate lending. In the AFR interview, you said that you wouldn't increase your risk tolerance to basically fulfill that objective. But it kind of feels to me like that would suggest that the greater than 2.5% probability that you've got to take on board a little bit more risk relative to the portfolio to deliver it. Could you just walk us through why we should feel comfortable that this is not something to watch?
Andrew Irvine: Yes. Look, our commercial real estate exposure has reduced markedly over the last number of years. as a percentage of our total book. We're a really good bank for construction and development. And it's an area where we have specialty teams both in our business and private bank as well as in our corporate and institutional bank. And we are starting to see really good high-quality projects that we want to bank and push into. And that was what we were disclosing to the market, and we're really excited about our ambition in this space. The other thing that we've been really successful at is executing a number of partnerships with third-party capital providers. So the other thing to note is that we are looking to originate $30 billion of construction and development loans, but you should not assume that we'll be holding all of that on our bank balance sheet. So we have a number of capital partners, that we'll also be distributing growth loans to over the course of time. We think that's actually a unique thing for our bank. And it's certainly helping us win deals from other institutions because we can do larger holds because we're distributing at the back and managing our risk effectively. And so you should not, in any way, assume that we're going to be taking on higher levels of risk as we seek to grow in this space. That's not the case.
Brian Johnson: We should not expect to see that greater than 2.5% probability of default, or the 8%, that should not rise other things being equal.
Andrew Irvine: That's correct.
Operator: Your next question comes from Matthew Wilson with Jarden.
Matthew Wilson: Matthew Wilson, Jarden. Two questions, if I may. Firstly, do you think your investments/OpEx capitalization policy is becoming materially out of whack with your peers now you're at $3.4 billion. That's $1.5 billion higher than the peer average. It's materially understating your cost base and your CTI ratio. Can you comment on the level of capitalization? Then I have a second question.
Shaun Dooley: Yes. Maybe Andrew, I'll kick off with that. So, yes, the balance has increased in recent years as our additions to the stock have exceeded the amortization. But the nature of our capitalized investment is it's driven by the nature of what we spend each year. and also including the maturity of the project. So clearly, in the early phase of a project, you're going to see more OpEx and then CapEx will increase in the build phase. And we talked about the unsecured platform in our earlier comments as that sort of reaches its maturity. I think there's also some just differences in approach that some of the peers take as well, and that will drive some differences. That's okay. We're fine with our policy. And as is our board. But our spend over the last couple of years has been much more weighted towards our technology modernization, right? And that's been a core part of what we've been talking to the market about. And some of the examples of that are our strategic stance for our financial crime onboarding systems, our core ledger migration. In New Zealand, the migration of our data centers, and as I said before, the unsecured platform. So we're overall comfortable with both the envelope of the spend we make but also the outcomes that they spend.
Matthew Wilson: Okay. And then secondly, in late October, you created a new CEO direct report role at group executive transformation. And NAB's generally thought of as a bank that doesn't need large self-help transformation type projects. It's more akin to CBA, but that role seems to contradict that perspective. Can you talk more on why that role is necessary? Does it clash with your very effective CTO, Patrick Wright's role in technology?
Andrew Irvine: Not at all. It's all about continuing to drive persistent modular transformation in our bank. When we look at the proportion of our technology spend that's going on improving the bank outcomes for customers as well as modernizing our technology, it's increasing. And so I wanted to have a new direct report on the team who knows our systems really, really well and is going to work with Patrick and the rest of the ELT to advance the agenda. This is not some onetime project that we're going to do for 2 or 3 years. This is persistent spend that we want to do thoughtfully and well. We've done a significant amount of transformation in our bank already, but some of the things that are now coming up are becoming some of the tougher ones. Some of the horizontal platforms that we use across the bank. And I think Shane is going to be a really strong addition to our executive team working with Patrick to advance that. So I wouldn't think of it as adding transformation, risk in any way, shape or form.
Matthew Wilson: But I suppose what you're saying is perhaps there's more change required on an ongoing basis in the bank than perhaps the market appreciates?
Andrew Irvine: I wouldn't characterize it that way. I think we want to be a winner in Australian and New Zealand banking. And so you need to be able to effectively understand architect, design, deliver and consume change and do that persistently well year in, year out forever. And so having a function in our organization focused on managing transformation and doing it in a coordinated way, I think, is a good thing. But this is not a project-driven approach. This is not -- don't assume that this means that we're becoming a riskier transformation. That's not the case. It's going to continue to be modular, bite-size changes to how we think about execution.
Matthew Wilson: That's right. And does that incorporate any changes that may happen from the stable coins of becoming a feature around the globe. You talk about transaction accounts today as being very important. They're likely to be replaced by some form factor of digital money, stablecoins going forward. What's Shane's role and that evolution of the financial system?
Andrew Irvine: Yes. No, Shane has also been deeply involved in managing all of our payment capabilities. So he's deep, deep payments. And so he's going to be a critical leader for us in looking around the corner around how things like stablecoins are going to shape up globally and here in Australia and what the impact might be to our business model.
Operator: Your next question comes from Brendan Sproules with Goldman Sachs.
Brendan Sproules: Brendan from Goldman Sachs. I just had a question on some of the statements that you made in response to BJ's question around the capital position. You talked about the confidence you've got in the profit that will come out of this risk-weighted asset growth that you've had in the last 12 months. If I look on Slide 21, the thing that's held back your profit growth has been this large negative jaws between net operating income and operating expenses. Could you maybe talk into '26 and '27, you talked about cost growth at a little bit under or under 4.6%. What are you thinking in terms of positive jaws and actually been able to turn around the growth in your ROE?
Andrew Irvine: Yes. We target positive jaws over the cycle. And what's pleasing is, as you saw in one of the upfront pages around momentum, our momentum in the second half of '25 was strong. What you don't see is actually that there was an acceleration over the course of the second half. And so as a bank, we have good tailwinds going into 2026 across all of our businesses, particularly our business franchise and we would look to maintain that. And if we can do that with those types of numbers, that should deliver positive operating leverage. That's what we're targeting, but we've got to work hard to get it.
Brendan Sproules: And maybe my second question, just on the asset quality side. I mean Slide 28 shows your provisioning balances. And as you've seen the acceleration in business credit growth, you've seen your coverage ratio fall in terms of CP. Is that a trend that we're going to expect to continue just given how strong credit growth opportunities are in the market?
Shaun Dooley: If I could take that one. Thanks, Brendan. So the CP coverage is doing what we would expect it to do at this point in the cycle. I think one point to continue to focus on is the total provisioning coverage, and that's come down a little bit, but it's broadly stable and it has been over a period of time now. We sort of went through a build phase. And what you're seeing really is the outcomings of that build phase as we move through the cycle, and it's behaving in line with what we expected that to do. So I think the trajectory is playing out in the way we expected it to.
Operator: Your next question comes from Tom Strong with Citi.
Thomas Strong: Just two questions on the Corporate and Institutional Bank please. Just the first around the revenue. I mean you saw annualized GLA growth of 12% in NIM expansion. Can you just talk to, I guess, what you're seeing from a competitive standpoint in C&I in particular, given there's probably faring appetite from your peers to deploy capital into this space at the moment?
Andrew Irvine: Yes, I'm happy to take that one. What we saw from a market standpoint over the course of the whole year was at the big end of town, capital -- sorry, credit growth has been very strong in the double-digit range. What was pleasing for us is the SME credit growth improved in the second half compared to the first half because it was pretty asymmetric in the first half. All the growth was in the big end of town. We're playing in the areas where we both have real capability but where we can also generate a fair return and an attractive return. Some of the credit growth that you see in the big end of town is really thin. And if you don't get the deposits or the debt capital markets or the foreign exchange, it's hard to make a quid. So we just have to be really, really diligent and thoughtful around which opportunities that we want to pursue versus not pursue. But thankfully, over the course of the year, there were sufficient opportunities for us to be judicious and still put on good volume growth at attractive margins. So that's been pretty pleasing.
Thomas Strong: That's very clear. And I guess just as a follow-up question. If we look at the GLA growth of 6% in C&IB in the half, but the risk-weighted intensity was a lot lower than the 2%. Is that just relating to the mix of business that's skewing to that larger end?
Andrew Irvine: Yes, that's right, Tom.
Operator: Your next question comes from Matt Dunger with BofA.
Matthew Dunger: Just to understand the strong progress you've made on transaction accounts, but the total deposit growth slowed in the half, excluding C&IB particularly. You've showed that on Slide 79, Business Bank and term deposits showing some slower growth. We know that TDs have been competitive. So just wondering to what extent the lower TD growth reflects current pricing versus the planned shift you've been talking about in the franchise? And at what point do you start to worry about franchise momentum in the private bank?
Andrew Irvine: Our momentum in the private bank is really solid, and it's an area where we're seeing good outcomes. TD exposure for us was something that we wanted to kind of reduce the exposure to over time. So it's been a judicious decision to grow that portfolio at a lower rate than we are doing as long as we're getting the transactional deposits that we needed to fund our GLA growth. So we've had -- we have been able to be less aggressive in TDs because of the success of our data gathering and transactional. And my hope would be that, that continues because when you're not getting the deposits in transactional, then you have to get them from TD and it's more expensive to do. So the fact that we were so successful in transaction accounts meant that we didn't need to go to TD to fund our GLA growth. And as I mentioned at the top, we fully funded our GLA growth this year with customer deposits.
Operator: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.