#1FULL YEAR RESULTS 2016 Investor Presentation 27 October 2016 Andrew Thorburn Group Chief Executive Officer Gary Lennon Chief Financial Officer MOCKREL RED National Australia Bank ©2016 National Australia Bank Limited ABN 12 004 044 937 (NAB or the Company). NAB Group is NAB and its controlled entities. Neville Mock and daughter Mardi, Mock Red Hill#2OVERVIEW ANDREW THORBURN Group Chief Executive Officer This presentation is general background information about NAB. It is intended to be used by a professional analyst audience and is not intended to be relied upon as financial advice. Refer to page 129 for legal disclaimer. Financial information in this presentation is based on cash earnings, which is not a statutory financial measure. Refer to page 33 for definition and reconciliation to statutory net profit/loss. FY16 PERFORMANCE FINANCIALS (FY16 v FY15)¹ MOCKREL HILL BALANCE SHEET (FY16 v FY15)¹ CKRE National Australia Bank Cash earnings ($m)² 6,483 4.2% CET1 9.8% 47bps Dividend 198cps flat CET1 harmonised 14.0% 47bps Cash ROE 14.3% 50bps NSFR >100%³ NA Statutory profit ($m) 352 large B&DD charge (% GLAs) 15bps 1bp CUSTOMER EMPLOYEE ENGAGEMENT #1 NPS in Priority Segments 4,5 -4 High performing organisation benchmark of 60 -8 -12 -14 -16 -15 -16 61 56 -20 44 -21 -24 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 NAB Peer 1 Peer 2 -Peer 3 2014 2015 2016 ■NAB Engagement (1) (2) END (3) Information is presented on a continuing operations basis including prior period restatements, unless otherwise stated Refer to page 33 for definition of cash earnings and reconciliation to statutory net profit Based on draft APRA rules (4) (5) 3 (6) Net PromoterⓇ and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld Priority segments Net Promoter Score (NPS) is a simple average of the NPS scores of five priority segments: Mortgage Customers, Debt Free, Micro Business (<$1m), Small Business ($1m-<$5m) and Medium Business ($5m-<$50m). The Priority Segments NPS data is based on six month moving averages from Roy Morgan Research and DBM BFSM Research As measured in NAB's annual employee engagement survey "Speak Up, Step Up" conducted by Right Management. Note: Historical engagement figures have been restated to exclude discontinued operations National Australia Bank#3SOLID CONTRIBUTIONS ACROSS AUSTRALIA, NZ AND WEALTH CASH EARNINGS' AND UNDERLYING PROFIT² GROWTH (LOCAL CURRENCY) FY16 v FY15 4 2.8% Group 4.2% Underlying Profit Cash Earnings Australian Banking 5.5% 7.3% NZ Banking 1.6% 0.9% NAB Wealth 12.6% 12.7% Underlying Profit Cash Earnings Underlying Profit Cash Earnings Underlying Profit Cash Earnings (1) Refer to page 33 for definition of cash earnings and reconciliation to statutory net profit (2) Underlying profit represents cash earnings before various items, including tax expense and the charge for bad and doubtful debts. It is not a statutory financial measure MARKET SHARE TRENDS IN PRIORITY SEGMENTS MICRO AND SMALL BUSINESS MEDIUM BUSINESS AND AGRI 5 28% 26% 24% 22% 20% 18% Sep 14 Mar 15 38% 36% 34% 23% 32% 30% 28% 21% 26% Sep 15 Mar 16 Sep 16 Sep 14 -Turnover $1m to <$5m¹ ―Turnover $0m to <$1m1 HOUSING LENDING MULTIPLE OF SYSTEM GROWTH³ (x) National Australia Bank 32% 30% Mar 15 Sep 15 Mar 16 Sep 16 -Turnover $5m to <$50m¹ Agribusiness² 0.6 0.5 0.5 90 1.2 1.1 0.9 0.7 0.6 0.4 0.4 0.2 Oct Nov Dec 15 15 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul Aug 16 16 (2) (1) September 2016. DBM Business Financial Services Monitor, APRA Aligned Lending Market Share. Australian businesses with an aligned product, excluding Finance & Insurance and Government. APRA Aligned Lending market share is based on the total lending dollars held at the financial institution, divided by the total lending dollars held at financial institutions reporting to APRA, with products and Fls aligned as closely as possible to APRA definitions and inclusions. Micro Business (<$1m), Small Business ($1m-<$5m) and Medium Business ($5m-<$50m). June 2016. NAB APRA submission / RBA System National Australia (3) Monthly RBA Financial System. Total Financial System Data: RBA Statistics Report Bank#4AUSTRALIA AND NEW ZEALAND ECONOMIC CONDITIONS REMAIN FAVOURABLE NAB BUSINESS CONDITIONS AND CONFIDENCE¹ (Index) 20 5 NON-MINING REAL GDP GROWTH ABOVE LONG RUN AVERAGE² (%) 10 wwww 4 3 0 2 1 -10 Sep 10 Sep 11 Sep 12 0 Sep 13 Sep 14 Sep 15 Sep 16 Jun 06 Business conditions -Business confidence AUSTRALIAN DWELLING COMPLETION V ANNUAL POPULATION GROWTH (000's)³ 500 400 300 200 100 0 1984 1988 1992 1996 2000 2004 2008 Under construction4 -Completions 2012 -Population 2016 (1) Australia only. Source: NAB (2) Australia only. Source: NAB, ABS (3) Source: NAB, ABS (4) 2016 dwellings under construction as at Q2 2016 (5) Per cent change, average for year ended December quarter on average of previous year 6 (6) Per cent, as at December quarter FY16 FINANCIALS GARY LENNON Chief Financial Officer Jun 10 Jun 12 Jun 14 Jun 08 -Non-mining real GDP growth Long-term average ECONOMIC OUTLOOK (%) Jun 16 CY15 CY16(f) CY17(f) Australia GDP growth5 2.4 3.0 2.8 Unemployment 5.8 5.7 5.6 NZ GDP growth5 2.5 3.4 3.1 Unemployment 5.0 5.0 5.1 MOCKREL HILL CKRE National Australia Bank National Australia Bank#58 GROUP FINANCIAL PERFORMANCE GROWTH BY KEY FINANCIAL INDICATORS (HOH) ($m) 2.5% (30bps) 14.6% 14.3% 14.3% 3,182 3,220 3,263 Sep 15 2.2% Mar 16 ■Cash earnings Sep 16 Sep 15 Mar 16 Sep 16 Cash ROE 0.4% 3.6% 8,536 8,709 8,724 3,668 3,755 3,683 4,868 4,954 5,041 Sep 15 Mar 16 Sep 16 Sep 15 Mar 16 Sep 16 Sep 15 ■Net Operating Income Operating Expenses Mar 16 ■Underlying profit Sep 16 349 Sep 15 GROUP REVENUE AND NET INTEREST MARGIN NET OPERATING INCOME ($m) HoH revenue growth 0.2% 81 (118) 41 37 (73) 47 21.8% 375 Mar 16 ■B&DD charge 425 Sep 16 8,709 8,536 8,724 Excludes Markets & Treasury Sep 15 Mar 16 Volumes Margin Markets & Treasury¹ Income Fees & Commissions NAB Wealth FX & Other² Sep 16 GROUP NET INTEREST MARGIN 1.93% 1.88% MARKETS & TREASURY INCOME 0.03% (0.06%) ($m) 982 809 893 924 0.01% (0.01%) 19 (0.08%) 581 554 366 555 1.90% National Australia Bank 400 424 339 392 1.82% (1) (22) Sep 15 Mar 16 Lending Funding Mix Other Margin Sep 16 ex Markets & Sep 16 Markets & Treasury Treasury Mar 15 Sep 15 Mar 16 Sep 16 ■Customer risk management ³ NAB risk management³ ■Group Treasury4 (1) Excludes FX and Fees & Commissions (2) Largely relates to group funding and hedging activities and foreign exchange movements (3) NAB risk management comprises NII and OOI and is defined as management of interest rate risk in the banking book, wholesale funding and liquidity requirements and trading market risk to support the Group's franchises. Customer risk comprises OOI 9 (4) Group Treasury prior periods have been restated to reflect the reclassification of Group Treasury income National Australia Bank#611 10 15 15 25 35 KEY FUNDING COST DRIVERS FUNDING MIX-SEP 2016 LT Wholesale. Funding 22% TERM DEPOSITS¹ (bps) 125 ST Wholesale. Funding 17% Equity. 7% Deposits 54% 75 25 25 50 100 SHORT TERM WHOLESALE FUNDING² (bps) 45 LONG TERM WHOLESALE FUNDING³ (bps) 130 5 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 3M Bills-OIS Spread HY Average Cost 40 40 70 100 Sep 13 (1) Cost over market reference rate (2) Spread between 3 month AUD Bank Bills and Overnight Index Swaps (OIS). Half year average cost based on 3 month moving average. Source: Bloomberg (3) AUD Major Bank Wholesale Unsecured Funding rates over BBSW (3 years and 5 years) GROUP OPERATING EXPENSES WELL MANAGED OPERATING EXPENSES ($m) HoH expense growth (1.9%) 3,755 3,668 FURTHER DETAIL ON OPERATING EXPENSES Sep 13 Dec 13 (51) (98) 29 56 (8) Sep 15 Mar 16 Personnel costs Productivity savings Technology and investment Depreciation and Amortisation Other Mar 14 • Productivity savings delivered in FY16 of $187m (2H16 increase $98m) ($m) 479 570 469 531 1% 2% • Targeting ongoing annual productivity savings of greater than $200m pa with some reinvested 44% 63% 59% 47% • Capitalised software balance increased $312m over FY16 to $2,344m (2H16 increase $217m) due to Personal Bank Origination Platform (PBOP) and New Payments Platform (NPP) development 19% 24% 9% 9% 27% 32% 35% 29% Mar 15 Sep 15 ■ Other Mar 16 Infrastructure Sep 16 PROJECT INVESTMENT SPEND (OPEX AND CAPEX) ■ Efficiency and Sustainable Revenue ■Compliance / Operational Risk National Australia Bank Jun 14 Sep 16 Dec 13 Sep 14 Dec 14 Mar 14 Mar 15 Jun 14 Sep 14 Jun 15 Sep 15 -3 Year 5 Year 3,683 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Dec 15 Mar 16 Mar 16 Jun 16 Jun 16 Sep 16 Sep 16 National Australia Bank#712 ASSET QUALITY REMAINS SOUND B&DDS AND AS A % OF GLAS ($m) 90+ DPD & GIAS, AND WATCH LOANS AS A % OF GLAS 0.16% 0.12% 0.13% 0.14% 0.16% 1.11% 0.77% 0.63% 0.78% 0.85% 399 425 349 299 49 100 53 1.47% 349 350 296 375 325 1.16% 1.22% 1.15% 1.13% (50) Sep 14 Mar 15 Sep 15 Mar 16 B&DD charge CP Overlays B&DDS as a % of GLAS (annualised) Sep 16 Sep 14 Mar 15 Sep 15 Watch loans as % of GLAS Mar 16 Sep 16 90+ DPD & GIAS as a % of GLAS NEW IMPAIRED ASSETS ($m) 1,246 Sep 14 642 Mar 15 ■New impaired assets 570 Sep 15 AUSTRALIAN BUSINESS LENDING RISK PROFILE 15.8% 12.8% 11.7% 11.7% 11.4% 11.3% 11.6% 11.5% 1,291 1,046 522 27% 26% 300 22% 20% 16% 14% 769 14% 746 13% Mar 16 Sep 16 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 NZ Dairy impaired no loss' (1) NZ Banking dairy exposures currently assessed as no loss based on collective provisions and security held COLLECTIVE AND SPECIFIC PROVISIONS COLLECTIVE AND SPECIFIC PROVISIONS Australian business exposures by probability of default > 2% Australian CRE as % Australian GLAS COLLECTIVE PROVISION MOVEMENTS ($m) ($m) 3,610 3,502 3,580 3,523 700 448 602 712 3,054 2,910 2,978 2,811 2,978 Mar 15 Sep 15 ■Collective provisions SPECIFIC PROVISION COVERAGE 39 (188) 100 (63) (55) National Australia Bank 2,811 Mar 16 Overlays Mar 16 Specific provisions Sep 16 Volume and Transfer to credit specific quality provisions CP on derivatives UK CRE sale 1 Sep 16 and loans at fair value COLLECTIVE PROVISION COVERAGE AS % OF EXPOSURE³ 12.9% 45% 40% 11.4% 35% Illustrative example only for large corporate exposures prior to the point of impairment 30% 25% 51.2% 20% 38.3% 15% 26.9% 10% 5% Specific provisions as % of GIAS, NZ Dairy impaired no loss (incl. no loss)² loans Specific provisions as % of GIAS (excl no loss)² Partial write-offs Specific provisions 0% & Partial Write-Offs as % of GIAS (excl. no loss)² Increase in expected loss as credit deteriorates Unsecured -Fully secured 13 (1) A $55m benefit from the sale of a parcel of UK CRE loans was fully offset with other movements in the balance sheet including the de-recognition of loans and advances and the receivable on the consideration of the sale of the portfolio which results in a nil impact to cash earnings (2) Balances currently assessed as 'impaired no loss' are excluded from the reported specific provision coverage ratio of 38.3% as no specific provisions are held against these balances. Provisions associated with 'impaired no loss' balances are included within collective provision and therefore not included in these ratios (3) Relates to large corporate exposure originated as investment grade. Includes migration from IFRS 9 Stage 1 to 2 followed by Stage 2 to 3. Also includes forward looking component of IFRS 9 41% 11% National Australia Bank#814 15 ASSET QUALITY AREAS OF INTEREST ASSET QUALITY CONSIDERATIONS NZ Dairy • • Outlook for NZ Dairy improved following Fonterra milk price forecast increase from NZ$4.25 to NZ$5.25 1.92% CP coverage of NZ Dairy book (~9.4% of impaired no loss portfolio) NZ DAIRY PORTFOLIO BY CATEGORISATION (NZ$m) 8,269 8,417 8,430 18 57 99 579 999 823 576 509 -80% of dairy farm valuations updated in 2H16 resulting in 3% (~NZ$307m) reduction in total valuations Residential Development Residential development lending exposure $4.4bn and $2.2bn for land. Exposure to higher risk inner city postcodes -~20% of total residential developer portfolio RESIDENTIAL DEVELOPMENT EXPOSURE¹ 60% 7,252 7,205 6,999 Mar 16 Sep 16 Sep 15 ■Performing Watch & 90+ DPD ■Impaired - No Loss Impaired - Loss NZ DAIRY COLLECTIVE PROVISIONS AND AS % OF NZ DAIRY EAD 1.92% (NZ$m) 40% 20% 0% VIC NSW ■Within Inner-City QLD WA SA ■Outside Inner-City 1.63% 1.03% 169 147 0.71% 59 93 Mar 15 Sep 15 Mar 16 Sep 16 (1) 'Inner-City' includes CBD and adjoining postcodes. There is exposure to one development in each of the inner-cities of Darwin and Hobart. Includes transactions that are well advanced but not yet drawn-down SOLID AUSTRALIAN BANKING PERFORMANCE AUSTRALIAN BANKING Cash earnings Underlying profit' Revenue Expenses 7.3% 5.5% 4.9% 4.1% 3.1% 0.7% 1.9% (1.1%) National Australia Bank 2H16 vs 1H16 FY16 vs FY15 2H16 vs 1H16 FY16 vs FY15 2H16 vs 1H16 FY16 vs FY15 2H16 vs 1H16 FY16 vs FY15 AUSTRALIAN BANKING NET INTEREST MARGIN 1.70% AUSTRALIAN BANKING LOAN GROWTH² (%) 0.03% (0.06%) 0.01% (0.01%) (0.06%) 4.9% 1.67% 3.0% 3.0% 1.61% 1.7% 1.7% (0.3%) 0.1% Sep 15 Mar 16 Sep 16 Sep 15 Mar 16 Sep 16 Sep 15 Mar 16 Lending Margin Funding Mix Other Sep 16 ex Markets & Treasury Markets & Sep 16 ■Housing Lending Business Lending Treasury (1) Underlying profit represents cash earnings before various items, including tax expense and the charge for bad and doubtful debts. It is not a statutory financial measure (2) Spot volumes (3) Personal lending includes consumer cards and personal loans 4.1% (0.2%) Mar 16 Sep 16 ■Personal lending³ National Australia Bank#916 BUSINESS BANKING MOMENTUM IMPROVING BUSINESS BANKING CUSTOMER REVENUE 1,2 ($m) 3,918 3,969 4,007 4,065 NET INTEREST MARGIN³ 2.41% 2.31% 2.34% 2.33% 2.05% 1.85% 1.79% 1.81% Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 Business Banking¹ Mar 15 Sep 15 Mar 16 Sep 16 Business Lending BUSINESS LENDING TO HIGHER RETURNING SEGMENTS NAB Business, Agri and Health loans Institutional and Corporate5 7.3% 6.3% 2.2% 4.8% 2.3% 2.1% 1.1% (2.8%) REVENUE GROWTH IN PRIORITY SEGMENTS6 0.3% 1.3% 4.4% 2.1% Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 1H15 2H15 1H16 2H16 (1) Based on unaudited management information data (4) (2) Customer revenue numbers have been restated to reflect the transfer of customers between Business Banking and Personal Banking, consistent with where customers are domiciled in 2016 (5) NAB Business is the segment of Business Banking which supports business customers with lending typically up to $25m, excluding the Specialised Businesses Includes Institutional, Corporate, Corporate Property loans and Capital Finance (3) Business Banking NIM is earned on home lending, deposit and business lending products. It includes the impact of cost of funds (6) methodology changes between Housing Lending and Deposits products, resulting in a 1bp benefit in the Sep 16 half (nil impact for Australian Banking). Business Lending NIM is the product margin earned predominantly through distribution to Business Banking customers Based on unaudited management information for NAB Business, Specialised Businesses and Private Wealth. Specialised Businesses includes Agri, Health, Government, Education and Community National Australia Bank PERSONAL BANKING REVENUE IMPACTED BY HIGHER FUNDING COSTS PERSONAL BANKING CUSTOMER REVENUE¹ NET INTEREST MARGIN ($m) 3.5% 2.25% 2.14% 2.16% 2.13% (0.5%) 2,214 2,345 2,439 2,428 1.40% 1.35% 1.35% 1.28% Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 Personal Banking1,2 Mar 15 Sep 15 Mar 16 Sep 16 Housing lending³ HOUSING LENDING BY CHANNEL 1,4 ($bn) 5% 6% 2% 103.9 106.6 108.9 88.2 84.8 83.5 75.2 75.9 76.8 Sep 15 Mar 16 Sep 16 Sep 15 Mar 16 Sep 16 ■Broker ■Retail, Direct and Small Business Mar 16 Sep 15 Sep 16 ■NAB Business, CSB5 and Private Wealth Personal Banking NIM includes the impact of cost of funds methodology changes between Housing Lending and Deposits products, resulting in a 2bps NIM decline in the Sep 16 half year (nil impact for Australian Banking) Housing lending NIM includes the impact of cost of funds methodology changes between Housing Lending and Deposits products, resulting in a 4bps NIM decline in the Sep 16 half year (nil impact for Australian Banking) Spot volumes. Excludes Ubank, Asia and Non-performing loans. Prior periods have been restated to reflect customer transfers Corporate and Specialised Business (1) Based on unaudited management information (2) (3) (4) (5) 17 National Australia Bank#1018 NZ BANKING BENEFITING FROM MORE NORMAL B&DD EXPENSE CASH EARNINGS AND UNDERLYING PROFIT¹ NET INTEREST MARGIN (NZ$m) 627 639 636 641 432 2.31% 418 405 404 (0.02%) (0.07%) 0.00% (0.02%) 2.20% Mar 15 Sep 15 Cash earnings Mar 16 -Underlying profit Sep 16 Mar 16 Lending Margin Funding Mix Other Sep 16 B&DD CHARGE AND AS A % OF GLAS² (NZ$m) TOTAL 90+ DPD AND GIAS AND AS % OF GLAS (NZ$m) 0.26% 1,251 0.24% 1,017 2.00% 0.14% 31 23 0.11% 650 823 1.50% 488 511 579 412 1.00% 58 57 61 30 11 0.50% 438 428 0.00% (12) Mar 15 Mar 14 Sep 15 Mar 16 Sep 16 ■Specific B&DD charge Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Dairy Impaired Assets currently assessed as no loss based on security held 90+ DPD and GIAs Collective B&DD charge Total 90+ DPD and GIAS as % GLAS (RHS) (1) Underlying profit represents cash earnings before various items, including tax expense and the charge for bad and doubtful debts. It is not a statutory financial measure (2) Spot volumes. Half year B&DD as a % of GLAS annualised GOOD GROWTH IN NAB WEALTH EARNINGS NAB WEALTH CASH EARNINGS LIFE INSURANCE SALE ($m) 262 249 241 223 • Sale of 80% of life insurance business to Nippon Life for $2.4bn completed on 3 October and captured in FY16 results¹ 65 81 90 • CET1 capital benefit of 45bps 67 National Australia Bank 197 156 160 159 Mar 15 Sep 15 Mar 16 Sep 16 Discontinued operations ■Continuing operations NET INVESTMENTS INCOME TO AVERAGE FUM AND FUA² • NAB's 20% interest in MLC Life insurance business is included in continuing operations cash earnings and reported as a share of associate profit in NAB Wealth earnings Goodwill for the NAB Wealth business is reduced by $1.7bn to $2.4bn NAB retains MLC brand, but licensed for use by the MLC Life insurance business for 10 years. MLC brand will continue to be applied to NAB's superannuation, investments and advice business 3 YEAR PERFORMANCE OF FUM EXCEEDING BENCHMARK³ ($m) 0.73% 0.63% 0.62% 0.61% 77.5% 584 552 560 595 71.9% 61.4% 64.8% Mar 15 Sep 15 Mar 16 Sep 16 Net Investments Income Net Investments Income to Average FUM/A Mar 15 Sep 15 Mar 16 Sep 16 (1) (2) Of the $2.4bn, $0.2bn was received as a dividend during FY16 and $2.2bn was received on completion (3 October 2016). Loss of control and deconsolidation occurred on 30 September 2016 Funds Under Management and Funds Under Administration on a proportional ownership basis. 2H16 margins exclude the life insurance business related FUM. Prior period margins have been restated (3) This is a representative measure of performance across all asset classes which is inclusive of approximately 75% of Funds Under Management 19 National Australia Bank#11STRONG CAPITAL AND FUNDING POSITION GROUP BASEL III COMMON EQUITY TIER 1 CAPITAL RATIOS (%) 9.69 Capital generation 25bps (17bps ex DRP) 0.90 (0.64) (0.01) (0.69) 0.45 0.07 9.77 4.23 14.00 Mar 16 Cash earnings Dividend net of DRP participation RWA growth¹ Mortgage risk weight changes 80% sale of Life insurance Other business Sep 16 (APRA standards) Internationally Comparable CET1 adjustments Sep 16 (Internationally Comparable CET1)² CAPITAL CONSIDERATIONS • CET1 ratio operating target range of 8.75% - 9.25% Leverage ratio is 5.7% on an APRA basis and 6.2% on an Internationally Comparable basis 2,3 · • Internationally Comparable CET1 ratio up 98bps in 2H16 to 14%, reflecting mainly mortgage risk weight change-ratio comfortably within top quartile of global peers based on recent studies NET STABLE FUNDING RATIO • NAB Group NSFR is >100% as at 30 September 2016 based on draft APRA rules • Minimum 100% compliance required by 1 January 2018 • Draft rules largely consistent with Basel with adjustment for assets supporting the CLF 20 (1) RWA growth excludes the impacts of mortgage risk weight changes, sale of 80% of NAB Wealth's life insurance business and reduction in operational risk capital (2) Internationally Comparable CET1 ratio at 30 September 2016 aligns with the APRA study entitled "International Capital Comparison Study" released on 13 July 2015. Refer to appendix page 94 for more detail (3) Leverage ratio calculated using an International Capital Tier 1 capital measure includes transitional relief for non-Basel 3 compliant instruments SUMMARY • Solid operational performance with costs well managed • Business Banking improvement - margins stable Asset quality sound - $100m top up to collective provision overlay • Well placed for any potential regulatory changes 21 21 о Capital position strong - 9.77% CET1 о NSFR above 100% National Australia Bank National Australia Bank#12STRATEGIC PRIORITIES ANDREW THORBURN Group Chief Executive Officer MOCKEL RED HILL CKRE OUR STRATEGIC FOCUS VISION OBJECTIVES Our customers are advocates Generating attractive returns AUSTRALIA AND NEW ZEALAND'S MOST RESPECTED BANK TARGETS NPS #1 vs major bank peers TSR1 - #1 vs major bank peers ROE #1 for ROE improvement vs major bank peers 23 Engaged people Top quartile engagement of Australian and New Zealand companies EXECUTION Deliver a great customer experience Reshape our business to perform National Australia Bank Deepen relationships in priority customer segments Be known for great leadership, talent and people FOUNDATION Strong balance sheet Risk management (1) TSR = Total Shareholder Return as measured against Australian Financial Services firms as listed in our 2015 Annual Financial Report Technology National Australia Bank#13PRIORITY SEGMENTS TO DRIVE GROWTH Segment definition Contribution to Group revenue SMALL BUSINESS MEDIUM BUSINESS INVESTORS Turnover $0.1m-$5m Turnover $5m-$50m Building or maintaining wealth 7% 29% 20% HOME OWNERS Saving for or paying off own home 11% Market share 22%1 32%1 13%2 12%2 Customer NPS rank³ - 1st 3rd 1st 2nd 24 Our focus Accelerate use of digital products and direct channels to transform the customer experience Extend and deepen industry specialisation Seamless bank-wealth alignment and leverage Australia's largest retail superannuation fund Simpler more integrated way for home owners to manage their financial affairs (1) Small & Medium Business source: DBM Business Financial Services Monitor. September 2016. Data weighted to the ABS business population, shown on a 12mma. Market Share is APRA Aligned Lending Market Share based on the total lending dollars held at the FI, divided by the total lending dollars held at Fls reporting to APRA, for products and Fls reporting to APRA. (2) MFI Customer Market Share (# NAB MFI customers in segment / # total MFI customers in segment). Based on NAB brand only using NAB defined customer segments. Source: Roy Morgan Research Single Source; Sep-16 12mma (3) Net Promoter, Net Promoter Score and NPS are registered trademarks of Bain & Company, Inc., Satmetrix Systems Inc. and Fred Reichheld. NAB AFI NPS compared with three major Australian banks (ANZ, CBA, WBC). Small & Medium Business source: DBM Business Financial Services Monitor. September 2016 6mma. Medium Business weighted to the ABS business population. Small Business is a NAB construct that combines weighted results for the Lower (turnover $0.1m-<$1m) & Higher (turnover $1m-<$5m) Small Business sub-segments, using a 50:50 weighting approach. This metric does not reflect the relative size of these segments as per the ABS business population. Ranking is based on absolute scores, not statistically significant differences. National Australia Bank 25 TECHNOLOGY MAKING IT EASIER FOR OUR CUSTOMERS PBOP RETAIL ROLLOUT COMPLETE • ~8,000 bankers across branches, contact and fulfilment centres trained and using the platform • • Expect to switch off legacy system for origination of Credit Cards, Personal Loans and Home Loans in 2017 through personal bank Focus now on leveraging benefits and expanding capability to other channels • Uplift in Home Loan conversion rates • >70% Home Loan documents signed online • >90% Personal Loans documents signed online FASTER TIME TO "YES" AND CASH (Days) 5.2 50% Time to open a credit card 2.6 ■Legacy median 5.8 59% Time to cash for Personal Loan ■PBOP median 2.4 NEW MOBILE BANKING PLATFORM LAUNCHED OCTOBER 2016 MY ACCOUNTS Good ANDREW Welcome ANDREW о $3.654.00 Personal Account #3200 VISA nab NAB PAY Hack of your phonon 13.00 1333 NAB y cadend Personal Accent #3250 • ALLOW ME TO USE MY CARD FOR $34.00 Ovinesses Certa Use and Mashaan end of your holiday OVERSEAS TRAVEL FACTO • NAB QUICKBIZ LOANS Android launched, iOS to follow shortly World leading self-service Card Controls Real-time provisioning of Credit Cards to use with NAB Pay API technology reusable across new platforms - cost and speed benefits Digital application for small business lending up to $50k completed in as little as 10 minutes • Decision within 60 seconds of completing online application Funding available within three business days with further improvements planned No physical security required National Australia Bank#1426 27 RESHAPING OUR BUSINESS PRODUCTIVITY CONSIDERATIONS • Managing for positive 'jaws' • Investment spend more focused on customer and productivity initiatives - Productivity savings – third party expenses, process automation, customer journeys, PBOP FY16 THIRD PARTY PAYMENTS PROCESS AUTOMATION Postage & Telecommunications 10% Marketing 5% Professional Services 7% Property 11% $3.8bn Piloting use of process automation technology Other 33% Seven processes automated in 2H16 IT 35% GRANULAR FOCUS ON ROE CASH ROE v PEER AVERAGE (EX SPECIFIED ITEMS)¹ 15.0% 16.8% 13.8% Pipeline of >30 to be delivered in FY17 CUSTOMER JOURNEYS Redesigning customer journeys end-to-end to improve experience and efficiency Merchant acquiring example • Four day improvement in customer setup 16.0% ~2x increase in multi-product sales 14.3% 14.3% Sep 14 EMBEDDING ROE FOCUS Sep 15 ■ NAB Peer Average • Performance Unit framework enables granular ROE focus $5.8bn of Corporate and Institutional loan run-off in FY16 - single digit ROES. Further opportunities • ROE is one of the main metrics in Business Banker performance scorecards ROE 'TILT' IN BUSINESS BANKING Sep 16 2H16 ROE ex mortgages >2x higher . Opportunities through better limit management and collateral matching NAB Business, Agri, Health & Private Wealth Institutional, Corporate, Corporate Property & other (1) NAB September 2014 and September 2015 ROE are as reported (excluding specified items), i.e. includes CYBG and 100% of NAB Wealth's life insurance business. September 2015 peer average ROE assumes average of half year ROE excluding specified items for ANZ. NAB September 2016 ROE is on a continuing operations basis. September 2016 ROE peer average based on last reported peer result for ANZ, CBA, WBC and excluding specified items for ANZ National Australia Bank National Australia Bank#1528 STRONG CAPITAL POSITION SUPPORTS DIVIDEND DIVIDEND CONSIDERATIONS • Dividend in each half considered in the context of capital, earnings and outlook • FY16 final dividend of 99 cents per share reflects current circumstances • Strong capital position (CET1 of 9.77% well above target range of 8.75-9.25%) • Current RWA growth and ROE • Surplus franking credits CAPITAL NEUTRAL PAYOUT RATIO SCENARIOS¹ SURPLUS FRANKING CREDITS3 ($m) 29 Return on Equity 12% 13% 14% 15% 548 449 1% 92% 93% 93% 93% 2% 84% 86% 87% 87% RWA 3% 77% 79% 80% 81% Growth 178 p.a. 4% 69% 72% 74% 75% 5% 62% 65% 67% 69% 71 6% 54% 58% 61% 63% FY16 capital neutral payout ratio² Sep 13 Sep 14 Sep 15 Sep 16 (1) Illustrative scenarios assume maintenance of a 9.75% CET1 ratio, excludes DRP (2) Full year 2016 underlying RWA growth 1.3%, excluding CYBG demerger, sale of 80% of NAB Wealth's life insurance business, operational risk, and mortgage risk weight changes (3) After payment of final dividend OVERALL SUMMARY • Completed all major legacy asset disposals . Core business sound Granular focus on ROE о CET1 ratio and asset quality strong о Tight management of expenses о Business Banking showing steady improvements . Environment challenging but stable • Clear future plan о Great customer experience о Deepen relationship with customers in our priority segments о Reshaping our business for the future environment – productivity, digital/physical, bank/wealth о Great leadership, talent and people National Australia Bank National Australia Bank#16ADDITIONAL INFORMATION GROUP Australian Banking NZ Banking NAB Wealth Group Asset Quality Capital and Funding Environmental, Social and Governance Economic Outlook Glossary NEW OPERATING AND REPORTING STRUCTURE 31 Andrew Thorburn Group Chief Executive Officer MOCKREL HILL CKRE National Australia Bank Antony Cahill Chief Operating Officer Customer Products & Services Angela Mentis Chief Customer Officer - Business & Private Banking Cathryn Carver (Acting) Chief Customer Officer - Corporate & Institutional Banking Andrew Hagger Chief Customer Officer - Consumer Banking & Wealth Management Anthony Healy Chief Executive Officer Bank of New Zealand Gary Lennon Chief Financial Officer BUSINESS & PRIVATE BANKING NAB Business Business Direct and Small Business NAB Private JBWere CORPORATE & INSTITUTIONAL BANKING Global Institutional Banking Corporate Banking CONSUMER BANKING & WEALTH MANAGEMENT NZ BANKING David Gall Chief Risk Officer Agribusiness Corporate Lorraine Murphy Chief People Officer Personal Banking Retail UBank Business Fixed Income, Currencies and Commodities (FICC) Broker Partnership Direct Banking Wealth Advice Insurance Capital Financing Asset Servicing International Branches Life insurance Matt Lawrance (Acting) Chief Technology & Operations Officer National Australia Bank#17CUSTOMER FOCUS FY16 PRIORITY SEGMENT NET PROMOTER SCORE¹² -4 CONTINUING TO ADDRESS CUSTOMER PAIN POINTS Over 100 pain point fixes delivered during FY15 and FY16, including: -8 -12 -16 -20 -14 -15 -16 -21 -24 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 NAB Peer 1 Peer 2 -Peer 3 32 • • • Business fundamentals package - multiple products under a single fee 31,000 customers positively impacted Disputed transaction process ➤ 480,000 customers positively impacted Support for overseas customers 30,000 customers positively impacted Reduced Account Signatory requirements ➤ 750,000 customers positively impacted (1) Net PromoterⓇ and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld (2) Priority segments Net Promoter Score (NPS) is a simple average of the NPS scores of five priority segments: Mortgage Customers, Debt Free, Micro Business (<$1m), Small Business ($1m-<$5m) and Medium Business ($5m-<$50m). The Priority Segments NPS data is based on six month moving averages from Roy Morgan Research and DBM BFSM Research National Australia Bank GROUP CASH EARNINGS RECONCILIATION TO STATUTORY NET PROFIT • . NAB uses cash earnings (rather than statutory net profit attributable to owners of NAB) for its internal management reporting purposes and considers it a better reflection of the Group's underlying performance. Accordingly, information is presented on a cash earnings basis unless otherwise stated Cash earnings is not a statutory financial measure and is not presented in accordance with Australian Accounting Standards nor audited or reviewed in accordance with Australian Auditing Standards. Cash earnings is calculated by excluding discontinued operations and certain other items which are included within the statutory net profit attributable to owners of NAB. These non-cash earning items, and a reconciliation to statutory net profit attributable to owners of NAB, are presented in the table below. Prior period non-cash earnings have been restated to exclude discontinued operations • The definition of cash earnings, a discussion of non-cash earnings items and a full reconciliation of the cash earnings to statutory net profit attributable to owners of NAB is set out on page 2 of the 2016 Full Year Results Announcement. Section 5 of the 2016 Full Year Result Announcement sets out the Consolidated Income Statement of the Group. The Group's financial statements, prepared in accordance with the Corporations Act 2001 (Cth) and Australian Accounting Standards and audited in accordance with Australian Auditing Standards, will be released on 13 November in NAB's 2016 Financial Report Cash earnings Non-cash earnings items (after tax) FY16 ($m) FY16 v FY15 6,483 4.2% 2H16 ($m) 2H16 vs 1H16 3,263 1.3% Distributions 124 (29.1%) 60 (6.3%) Treasury Shares Fair value and hedge ineffectiveness 61 large (1) large (126) large (66) (10.0%) Life insurance 20% share of profit (39) (5.4%) (17) 22.7% Amortisation of acquired intangible assets (83) (3.8%) (43) (7.5%) Net profit from continuing operations 6,420 (5.6%) 3,196 (0.9%) Net (loss) after tax from discontinued operations (6,068) large (1,102) 77.8% Statutory net profit attributable to owners of NAB 352 (94.4%) 2,094 large 33 National Australia Bank#18GROUP NET INTEREST MARGIN GROUP NET INTEREST MARGIN AND EXCLUDING MARKETS & TREASURY IMPACT (HOH) 34 1.93% 1.92% Mar 15 1.90% 1.88% 1.93% 1.90% 1.90% 1.82% Sep 15 Group NIM Mar 16 Sep 16 Group NIM (excluding Markets & Treasury) GROUP NET INTEREST MARGIN SEPTEMBER 2016 v SEPTEMBER 2015 1.90% 0.05% (0.04%) 0.01% (0.02%) 1.90% (0.02%) 1.88% Sep 15 Lending Margin Funding Costs Mix Other Sep 16 ex Markets & Treasury Markets & Treasury Sep 16 ADDITIONAL INFORMATION Group AUSTRALIAN BANKING NZ Banking NAB Wealth Group Asset Quality Capital and Funding Environmental, Social and Governance Economic Outlook Glossary MOCKREL HILL CKRE National Australia Bank National Australia Bank#19AUSTRALIA BANKING CASH EARNINGS ($m) 36 2,536 2,694 Sep 15 52 (6) 32 22 43 43 (37) 2,778 Mar 16 Net Operating Income ex Markets & Treasury Markets & Treasury Expenses B&DDs Tax Expense Sep 16 AUSTRALIAN BANKING REVENUE TOTAL REVENUE BY KEY CUSTOMER SEGMENTS1,2 TOTAL REVENUE BY PRODUCT ($m) ($m) 6,713 7,001 7,047 6,680 6,713 6,680 7,001 7,047 581 366 555 554 894 946 981 790 899 931 890 961 2,214 2,345 2,439 2,428 1,114 1,217 1,392 1,416 1,996 1,946 1,948 1,954 3,918 3,969 4,007 4,065 1,723 Mar 15 1,796 Sep 15 1,877 Mar 16 Mar 15 Sep 15 Mar 16 Sep 16 ■Housing lending ■Business lending ■Deposits 1,770 Sep 16 ■Other banking products ■Business Banking Personal Banking ■NAB risk management³ CUSTOMER RISK MANAGEMENT REVENUE³ ■NAB & customer risk management 3 NAB RISK MANAGEMENT REVENUE³ ($m) ($m) 424 8.6 8.8 400 392 6.9 6.4 339 171 154 122 581 555 554 102 294 366 341 319 246 253 270 237 215 287 214 235 151 Mar 15 Sep 15 Mar 16 Sep 16 FX Rates (1) Based on unaudited, management information (2) (3) (4) 37 40 Customer revenue numbers for Mar 15 and Sep 15 have been restated to reflect the transfer of customers between Business Banking and Personal Banking, consistent with where customers are domiciled in 2016 Customer risk comprises OOI. NAB risk management comprises NII and OOI and is defined as management of interest rate risk in the banking book, wholesale funding and liquidity requirements and trading market risk to support the Group's franchises. Includes FX Average FICC traded market risk VaR for 2016 excludes the impact of hedging activities related to derivative valuation adjustments. Prior periods have not been adjusted as the hedging impact in these periods was immaterial to reported VaR Mar 15 Sep 15 Treasury FICC Mar 16 Sep 16 Avg FICC traded market risk VaR 4 National Australia Bank National Australia Bank#2038 AUSTRALIAN BANKING NET INTEREST MARGIN SEPTEMBER 2016 v MARCH 2016 (%) 1.70% 0.03% (0.06%) 0.01% (0.01%) 1.67% (0.06%) 1.61% Mar 16 Lending Margin Funding Mix Other Sep 16 ex Markets & Markets & Treasury Treasury Sep 16 SEPTEMBER 2016 v SEPTEMBER 2015 (%) 1.63% (0.04%) 0.06% 0.01% 0.01% 1.67% (0.01%) 1.66% Sep 15 Lending Margin Funding Mix Other Sep 16 ex Markets & Treasury Markets & Treasury Sep 16 BUSINESS AND PERSONAL BANKING NET INTEREST MARGIN BUSINESS BANKING NET INTEREST MARGIN¹ SEPTEMBER 2016 v MARCH 2016 (%) 2.34% Mar 16 0.04% Lending Margin (0.02%) Funding (0.01%) (0.02%) Mix PERSONAL BANKING NET INTEREST MARGIN²,3 SEPTEMBER 2016 v MARCH 2016 (%) 2.25% Mar 16 0.07% Lending Margin (0.15%) Funding 2.33% Other Sep 16 0.00% (0.01%) Mix Other 2.16% Sep 16 Business Banking NIM includes the impact of cost of funds methodology changes between Housing Lending and Deposits products, resulting in a 1bp benefit in the Sep 16 half (nil impact for Australian Banking) (1) (2) Based on unaudited management information (3) 39 Personal Banking NIM includes the impact of cost of funds methodology changes between Housing Lending and Deposits products, resulting in a (2bps) NIM decline in the Sep 16 half year (nil impact for Australian Banking) National Australia Bank National Australia Bank#2140 41 AUSTRALIAN BANKING EXPENSES OPERATING EXPENSES ($m) COST TO INCOME RATIO (%) 180 2,907 (75) 45 (2) 2,875 40.6% 42.3% 41.5% 40.8% Mar 16 Personnel Occupancy Costs Other Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 AUSTRALIAN BANKING ASSET QUALITY B&DD CHARGE 90+ DPD AND GIAS AND AS % OF TOTAL GLAS ($m) 341 (26) 13 (30) ($m) 0.76% 0.69% 0.72% 0.63% 298 3,352 2,869 3,222 3,413 Mar 15 Mar 16 Business Lending Housing Lending Other Banking Products Sep 16 Sep 15 90+ DPD & GIAS AUSTRALIAN BANKING NEW IMPAIRED ASSETS ($m) 677 679 476 460 Mar 15 Sep 15 Mar 16 (1) Includes personal lending, credit cards, investment securities and margin lending Sep 16 Mar 16 Sep 16 90+ DPD & GIAS as % of GLAS National Australia Bank National Australia Bank#2242 AUSTRALIAN BANKING: BUSINESS LENDING BUSINESS LENDING REVENUE BUSINESS LENDING NET INTEREST MARGIN ($m) (%) 1,996 276 1,946 309 1,948 319 1,954 304 1,720 1,637 1,629 1,650 1.79% 0.00% 0.03% 0.01% (0.02%) 1.81% Mar 15 Sep 15 ■NII Mar 16 Sep 16 Mar 16 OOI Lending Funding Margin Mix Capital Benefit Sep 16 BUSINESS LENDING GLAS¹ BUSINESS LENDING FLOW MOVEMENTS ($bn) 172.0 180.3 183.2 7.0 6.9 182.7 7.1 ($bn) 7.7 60.0 60.3 58.0 57.2 25.9 26.6 26.4 23.8 26.5 28.2 28.9 30.0 183.2 56.8 59.2 60.5 61.2 Mar 15 Sep 15 Mar 16 Sep 16 Agri & Health ■GIB² & Capital Financing (0.3%) 1.8 (0.2) (2.3) 0.2 182.7 NAB Business ■Corporate & Corporate Property ■ Other Mar 16 NAB Business, Corporate & GIB² & Capital Agri & Health Corporate Financing Property Other Sep 16 (1) Spot GLA volumes. Segment lending volumes are based on unaudited, management information data, and prior periods have been restated to reflect the transfer of customers, consistent with where customers are domiciled in 2016 (2) Global Institutional Banking AUSTRALIAN BANKING: BUSINESS PRIORITY SEGMENTS MARKET SHARE MARKET SHARE TRENDS BY PRIORITY SEGMENTS 35% 30% 25% 20% National Australia Bank 32% 30% 23% 21% 15% Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Turnover $0m to <$1m¹ Turnover $1m to <$5m¹ -Turnover $5m to <$50m Agribusiness² (1) September 2016. DBM Business Financial Services Monitor, APRA Aligned Lending Market Share. Australian businesses with an aligned product, excluding Finance & Insurance and Government. APRA Aligned Lending market share is based on the total lending dollars held at the financial institution, divided by the total lending dollars held at financial institutions reporting to APRA, with products and Fls aligned as closely as possible to APRA definitions and inclusions. Micro Business (<$1m), Small Business ($1m-<$5m) and Medium Business ($5m-<$50m). #1 Ranking based on simple scores, not statistically significant differences (2) June 2016. NAB APRA submission / RBA System 43 National Australia Bank#2344 45 AUSTRALIAN BANKING: BUSINESS LENDING MARKET SHARE MARKET SHARE BY INDUSTRY¹ 31% 26% 26% 25% 24% 24% 18% (1) Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 -Agribusiness -Mining June 2016. NAB APRA submission / RBA system Manufacturing Construction Wholesale AUSTRALIAN BANKING: BUSINESS LENDING ASSET QUALITY AUSTRALIAN BUSINESS LENDING RISK PROFILE Finance & Insurance Other 15.8% 12.8% 11.7% 11.7% 11.4% 11.3% 11.6% 11.5% 27% 26% 22% 20% 16% 14% 14% 13% Sep 09 Sep 10 Sep 11 Sep 12 Australian business exposures by probability of default > 2% Sep 13 Sep 14 Sep 15 Sep 16 -Australian Commercial Real Estate as % Australian GLAS 32% 30% 24% 24% 22% 20% 13% National Australia Bank National Australia Bank#24AUSTRALIAN BANKING: BUSINESS LENDING - ASSET QUALITY B&DD CHARGE AND AS % OF GLAS 90+ DPD AND GIAS AND AS % OF TOTAL BUSINESS GLAS ($m) 0.27% 0.20% 0.18% 0.15% 229 180 167 141 Mar 15 Sep 15 Mar 16 ($m) 0.95% 0.67% 0.77% 0.83% 1,642 Sep 16 Mar 15 B&DD charge B&DD/GLAS (half-year annualised) WELL SECURED - BUSINESS PRODUCTS¹ 1,208 Sep 15 1,413 1,516 Mar 16 Sep 16 Total Business Lending 90+ DPD and GIAS -Business Lending 90+ DPD and GIAs to Business Lending GLA PORTFOLIO QUALITY2,3 26% 26% 25% 23% 50% 50% 50% 50% 22% 22% 22% 22% 52% 52% 53% 55% 50% 50% 50% 50% Mar 15 Sep 15 ■Fully Secured Mar 16 Partially Secured Sep 16 Unsecured 46 (1) Represents assets within the Australian geography and offshore branches (2) Portfolio quality on a probability of default basis (3) Includes Asia Sep 15 Mar 15 ■Sub-Investment grade equivalent Mar 16 Sep 16 Investment grade equivalent AUSTRALIAN BANKING: BUSINESS LENDING - SME' ASSET QUALITY SME B&DD CHARGE AND AS % OF SME GLAS SME 90+ DPD AND GIAS AND AS % OF SME GLAS² ($m) 0.14% 0.13% 0.13% ($m) 0.23% 1.42% 1.11% 0.97% 0.88% 808 70 657 587 538 39 37 40 Sep 15 Mar 16 SME Business Lending 90+ DPD and GIAS 90+ DPD and GIAs to GLA Mar 15 Mar 15 Sep 15 B&DD charge Mar 16 Sep 16 B&DD/SME GLAS (half-year annualised) WELL SECURED - BUSINESS PRODUCTS PORTFOLIO QUALITY Sep 16 5% 5% 5% 5% 22% 20% 20% 21% 26% 25% 24% 23% 69% 70% 71% 72% 78% 80% 80% 79% 47 Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 ■Fully Secured Partially Secured Unsecured Sep 15 ■Sub-Investment grade equivalent Mar 16 Sep 16 Investment grade equivalent (1) SME business data reflects the NAB Business segment of Business Lending which supports business customers with lending typically up to $25m, excluding the Specialised Businesses. Based on unaudited, management information data. Represents assets within the Australian geography (2) Prior periods have been restated to reflect the transfer of customers between Business Banking and Personal Banking, consistent with where customers are domiciled in 2016 National Australia Bank National Australia Bank#25AUSTRALIAN BANKING: BUSINESS LENDING - COMMERCIAL REAL ESTATE Total $53.0bn¹ 11.5% of Gross Loans & Acceptances² State Location NSW VIC QLD WA Other Total 37% 28% 17% 9% 9% 100% Loan Balance < $5m 29% 41% 36% 34% 35% 35% Industrial. 15% Other 7% _Land > $5m < $10m ≥ $10m 11% 13% 14% 11% 14% 12% 60% 46% 50% 55% 51% 53% 6% Loan tenor 3 yrs 75% 79% 79% 78% 83% 78% Residential 13% Loan tenor ≥3 < 5 yrs 21% 17% 17% 18% 13% 18% Loan tenor ≥ 5 yrs 4% 4% 4% 4% 4% 4% Average loan size $m 3.3 2.4 2.6 2.9 2.8 2.8 Tourism & Leisure Security Level3 - Fully Secured 72% 86% 86% 91% 87% 81% 3% Retail 29% Partially Secured 11% 10% 11% 6% 12% 11% Unsecured 17% 4% 3% 3% 1% 8% Office 27% 90+ days past due ratio Impaired loans ratio 0.02% 0.13% 0.02% 0.04% 0.06% 0.25% 0.05% 0.11% 0.92% 0.04% 0.08% 0.25% Specific provision coverage ratio 11.6% 24.4% 33.1% 0.0% 0.5% 26.5% Construction/development 17% 16% 11% 18% 14% 15% Investment 83% 84% 89% 82% 86% 85% Mar 15 Sep 15 Mar 16 Sep 16 Portfolio Retail Office Residential Other4 Trend breakdown Construction/ development 2% 2% 63% 19% 90+ days past due ratio Impaired loans ratio Investment 98% 98% 37% 81% Specific provision coverage ratio 0.12% 0.13% 0.47% 0.35% 0.07% 0.05% 0.29% 0.25% 19.7% 16.1% 20.8% 26.5% (1) (2) Data has been prepared in accordance with APRA ARF230 guidelines Represents assets within the Australian geography (3) (4) Fully Secured is where the loan amount is less than 100% of the bank extended value of security; Partially Secured is where the loan amount is greater than 100% of the bank extended value of security; Unsecured is where no security is held and negative pledge arrangements are normally in place. Bank extended value is calculated as a discount to market value based on the nature of the underlying security Other consists of tourism and leisure, industrial, land and other National Australia Bank 48 49 AUSTRALIAN BANKING: DEVELOPER EXPOSURES LIMITED CRE LENDING TO DEVELOPERS ⚫ $53.0bn total Australian CRE exposure, of which • 85% is Investment; and • 15% is Developer • Residential development lending exposure $4.4bn and $2.2bn for land. Exposure to higher risk inner city postcodes -20% of total residential developer portfolio · Exposure concentrated in NSW/ACT (43%) and VIC/TAS (30%) DEVELOPER-COMMERCIAL PROPERTY BY TYPE COMMERCIAL PROPERTY - DEVELOPER V INVESTMENT Developer $8bn 15% Investment $45bn 85% DEVELOPER COMMERCIAL PROPERTY BY STATE Residential 55% Land 28% Retail .3% Other 5% Office 3% Tourism & Leisure 1% Industrial NSW/ACT 43% 5% VIC/TAS 30% SA/NT 5% QLD 12% WA 10% National Australia Bank#26AUSTRALIAN BANKING: RESIDENTIAL DEVELOPER EXPOSURES RESIDENTIAL DEVELOPER EXPOSURES - BY GEOGRAPHY RESIDENTIAL DEVELOPMENT EXPOSURE¹ 50 51 NSW/ACT 59% VIC/TAS 27% SA/NT 3% WA 3% QLD 8% 60% 40% 20% 0% VIC NSW QLD WA SA ■Within Inner-City ■ Outside Inner-City (1) Inner-City' includes CBD and adjoining postcodes. There is exposure to one development in each of the inner-cities of Darwin and Hobart. Includes transactions that are well advanced but not yet drawn-down AUSTRALIAN BANKING: HOUSING LENDING HOUSING LENDING REVENUE HOUSING LENDING NET INTEREST MARGIN ($m) (%) 1,723 1,796 1,877 141 141 131 1,770 143 (0.04%) 0.05% (0.12%) 0.00% (0.01%) 1,592 1,655 1,736 1,627 1.40% 1.36% National Australia Bank 1.28% Mar 15 Sep 15 NII Mar 16 Sep 16 Mar 16 Methodology Mar 16 change¹ adj Lending Funding Mix Margin Other Sep 16 HOUSING LENDING GLAS ($bn) 281.1 273.0 268.5 260.6 HOUSING LENDING MARKET SHARE² (x) Household data reclassification³ 15.0% 15.2% 15.3% 14.8% 14.9% 15.1% 15.0% 14.7% 14.6% Mar 15 Sep 15 Mar 16 Sep 16 1.9 1.7 1.3 1.2 1.2 1.3 0.8 0.9 0.4 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Aug 16 System Multiple Market share (1) Sep 16 Housing Lending net interest margin impacted by methodology change to the cost of funds, which is offset in Deposits and has nil impact at Australian Banking level (2) Half year to date RBA Financial System (3) Re-statement of APRA household data, including reclassification from housing to non-housing from July 13 to current. Sep 13 was not restated due to unavailability of Mar 13 data to calculate growth multiple for Sep 13 half year. National Australia Bank#2752 AUSTRALIAN BANKING: HOUSING LENDING HOUSING LENDING BY CHANNEL' HOUSING LENDING FLOW MOVEMENTS³ ($bn) 5% ($bn) 6 (8) 6% 46 (14) 2% (23) 103.9 106.6 108.9 83.5 84.8 88.2 75.2 75.9 76.8 271 278 Sep 15 Mar 16 Sep 16 Sep 15 Mar 16 Sep 16 ■Retail, Direct and Small Business ■Broker Sep 15 Mar 16 Sep 16 ■NAB Business, CSB² and Private Wealth Mar 16 New fundings & redraw Interest Repayments Pre- payments External refinance & other Sep 16 HOUSING LENDING VOLUME BY BORROWER AND REPAYMENT TYPE4 Owner Occupier Interest Only 13.1% Investor Principal & Interest 16.8% Owner occupied 57.7% Owner Occupier Principal & Interest 44.6% Investor Interest Only 25.5% Investor 42.3% AUSTRALIAN MORTGAGES BY GEOGRAPHY VIC/TAS 31% QLD 17% SA/NT 5% NSW/ACT 37% WA 10% (1) (2) Spot volumes. Excludes UBank, Asia and Non Performing Loans. Prior periods have been restated to reflect customer transfers Corporate and Specialised Banking, history has been restated to include Medfin Home Loans (3) Excludes Asia (4) Based on APRA ARF 320.0 reporting definitions. Interest Only includes Line of Credit National Australia Bank AUSTRALIAN BANKING: HOUSING LENDING AREAS OF INTEREST HOUSING LENDING PRACTICES AND CUSTOMER PROFILE Key practices • • • • • • Broker applications assessed centrally - verification, credit decisioning Floor interest rate 7.4% and serviceability buffer 2.25% including on existing debt Maximum LVR 95% for owner occupier and 90% for investor - less for high risk postcodes, at-risk postcodes, inner city and non- residents Income typically verified using salary credits into customers' accounts 20% shading of rental and other uncertain income Interest only lending repayments assessed on the residual principal and interest period All brokers licensed and subject to accreditation requirements NAB conducts broker level monitoring using specific review triggers such as delinquency thresholds Customer profile • Customers an average of 15.0 monthly payments in advance • 62.3% customers ≥1 month in advance1 MINING TOWNS WA and QLD housing exposure 10% and 17% of total housing book (NSW/ACT 37%, VIC/TAS 31%) ⚫ Housing exposure to key mining towns² ~1% of total housing book Captured in 'high risk postcodes' with max LVR 70% RESIDENTIAL APARTMENTS AND INNER CITY POSTCODES · Closely monitor inner city postcodes including those with high apartment concentration • Maximum LVR 80% for these postcodes • Lending to these postcodes <2% of total housing book NON-RESIDENT LENDING • NAB property survey suggests foreign buyer demand declined slightly in 2H16, but remains elevated at 10% of national new property sales and 7% established properties Lending to non-residents <3% of total housing book Maximum LVR 60%. 40% shading applies to foreign income 53 (1) Not reported for Advantedge. Excludes line of credit, interest only loans and the impact of offset accounts Includes eight postcodes in mining areas in WA and QLD (2) National Australia Bank#2854 AUSTRALIAN BANKING: HOUSING LENDING - ASSET QUALITY B&DD CHARGE AND AS % OF GLAS 90+ DPD AND GIAS AND AS % OF HOUSING LENDING GLAS ($m) 0.04% 0.03% 0.03% 0.01% 37 ($m) 0.62% 0.63% 0.62% 0.58% 55 42 1,606 1,557 1,687 1,778 Mar 15 6 Sep 15 B&DD charge Sep 16 Mar 15 Mar 16 -B&DD/GLAs (half year annualised) 90+ DPD AND GIAS AS % OF TOTAL HOUSING LENDING GLAS - - BY CHANNEL¹ Sep 15 Mar 16 Sep 16 Australian Banking Housing Lending 90+DPD and GIAs Australian Banking Housing Lending 90+DPD and GIAS/GLAS AUSTRALIAN MORTGAGES 90+ DPD AND GIAS AS % GLAS - BY STATE 1.6% 1.3% 1.4% 1.1% 1.2% 1.0% 0.9% 0.8% 0.7% 0.6% 0.4% 0.5% 0.2% 0.0% 0.3% Sep 09 Sep 10 Sep 11 Sep 12 ―Broker Sep 13 Sep 14 Sep 15 -Proprietary Sep 11 Sep 16 Sep 12 - NSW/ACT QLD (1) Excludes Asia Sep 13 Sep 14 SA/NT VIC/TAS Sep 15 ―WA Sep 16 -Total National Australia Bank AUSTRALIAN BANKING: HOUSING LENDING - STRESS TESTING HOUSING LENDING STRESS TESTING AT NAB • NAB regularly undertakes stress testing on a Group-wide basis and on specific risk types Stress testing and scenario analysis aim to take a forward view of potential risk events. Outcomes from stress testing inform decision making, particularly in regards to defining risk appetite, strategy, or contingency planning Scenario • • The stress scenario represents a severe recession. In a historical context, this recession is worse than in the early 1980s or 1990s, only exceeded by the 1930s recession. Unemployment rises to almost 11% at its peak, back to the worst post-war level reached in the early 1990s The downturn is sufficiently severe that it significantly impacts the property markets, with residential property prices declining by 31% in the shock scenario. Falls of this magnitude have not been seen in the housing market in the past one hundred years Results • Estimated Australian housing lending B&DD charge under these stressed conditions is $1.8bn cumulatively during the four years of the scenario of which $296m are losses on the segment of the portfolio otherwise covered by Lenders Mortgage Insurance (LMI) STRESSED SCENARIO - MAIN ECONOMIC PARAMETERS¹ Year 1 Year 2 Year 3 Year 4 Annual GDP growth (%) (1.4) (1.8) 0.5 3.8 Unemployment rate (%) 7.9 9.9 10.9 10.5 House prices (% p.a. change) (13.6) (13.0) (3.9) (0.1) Cash rate (%) 2.3 1.0 0.6 0.3 STRESSED LOSS OUTCOMES².3 68 625 595 491 Year 1 Year 2 Year 3 Year 4 Portfolio size (exposure at default, $bn) 350 352 355 362 Net B&DD ($m)4 Gross B&DD ($m) 89 724 711 589 . The results are comparable to the same stress test six months ago Net B&DD rate (%) 5 0.02 0.18 0.17 0.14 • All LMI coverage is with external insurers (1) (2) In order to provide comparison with previous half, macroeconomic parameters were kept consistent with 1H16 Results Announcement Australian IRB Residential Mortgages asset class. Includes Advantedge. Excludes offshore branches (3) Based on portfolio as at 31 March 2016 (4) (5) Net of LMI recoveries (as opposed to Gross B&DD which includes LMI recoveries). Assumes that in a stressed scenario 47% of LMI claims will be rejected Stressed B&DD rate is net of LMI recoveries and presented as a percentage of mortgage exposure at default 55 National Australia Bank#2957 40 56 AUSTRALIAN BANKING: HOUSING LENDING - LVR PROFILE AUSTRALIAN HOUSING LENDING DYNAMIC LVR BREAKDOWN OF DRAWN BALANCE¹ 60% AUSTRALIA HOUSING LENDING LVR BREAKDOWN AT ORIGINATION¹ 60% 50% 50% 40% 30% 20% 10% 0% 40% 30% b. ub. 20% 10% 0% LVR LVR LVR LVR LVR LVR LVR LVR LVR ≤60% 60.01% -70% 70.01% - 80% 80.01% 90% >90% ≤60% 60.01% -70% 70.01% - 80% 80.01% - 90% LVR >90% (1) Excludes Asia ■Mar 15 Sep 15 Mar 16 ■Sep 16 ■Mar 15 Sep 15 Mar 16 ■ Sep 16 AUSTRALIAN BANKING: HOUSING LENDING - KEY METRICS¹ Mar 15 Sep 15 Mar 16 Sep 16 Australian housing lending Balances attributed to: - Variable rate - Fixed rate - Line of credit Drawdowns attributed to: - Variable rate - Fixed rate -Line of credit Interest only drawn balance² Offset account balance ($bn) Balances attributed to: - Proprietary - Broker Drawdowns attributed to: - Proprietary 73.4% 75.7% 76.7% 77.5% 14.8% 13.3% 13.2% 13.2% 11.8% 11.0% 10.1% 9.3% 81.0% 84.9% 84.3% 81.0% 16.7% 12.5% 13.9% 17.0% 2.3% 2.6% 1.8% 2.0% 35.3% 34.5% 32.5% 31.9% 20.1 22.4 23.4 24.7 69.1% 68.6% 68.7% 68.3% 30.9% 31.4% 31.3% 31.7% - Broker 66.3% 67.4% 69.0% 65.6% 33.7% 32.6% 31.0% 34.4% Balances attributed to: - Owner Occupied³ 57.6% 57.2% 57.6% 57.7% - Investor³ 42.4% 42.0% 42.9% 42.3% Dynamic LVR on a drawn balance calculated basis 45.2% 45.8% 44.0% 45.1% Customers in advance ≥1 month 63.1% 62.9% 62.1% 62.3% Avg # of monthly payments in advance 13.9 14.3 14.7 15.0 Average drawn balance ($'000) 276 284 288 293 Low Documentation Low Documentation LVR cap (without LMI) 90+ days past due Impaired loans5 Specific provision coverage ratio Loss rate6 1.4% 1.2% 1.1% 0.9% 60% 60% 60% 60% 0.48% 0.45% 0.51% 0.52% 0.14% 0.13% 0.11% 0.11% 26.3% 25.0% 24.5% 25.8% 0.03% 0.02% 0.02% 0.03% (1) Excludes Asia (2) Excludes line of credit products (3) Source: APRA Monthly Banking Statistics (4) (5) Not reported for Advantedge. Excludes line of credit, interest only loans and the impact of offset accounts Includes Asia (6) 12 month rolling Net Write-offs / Spot Drawn Balances National Australia Bank National Australia Bank#3058 59 AUSTRALIAN BANKING: HOUSING LENDING - BROKER BROKER CONSIDERATIONS • Full NAB Product suite now available to brokers launched in September 2016 • Recruitment of an additional 379 brokers across NAB owned aggregators PLAN, Choice and FAST (10% increase)1 HOUSING LENDING VOLUMES - BROKER² ($bn) 88.2 83.5 84.8 79.8 Mar 15 Sep 15 Mar 16 Sep 16 NUMBER OF BROKERS UNDER OWNED AGGREGATORS DRAWDOWNS ATTRIBUTED TO BROKER 3,491 3,920 33.7% 4,299 32.6% 34.4% 31.0% Sep 14 Sep 15 ■PLAN, Choice, FAST brokers Aug 16 Mar 15 Sep 15 Mar 16 Sep 16 (1) (2) For the 12 months ended 30 September 2016 Spot volumes AUSTRALIAN BANKING: DEPOSITS AND TRANSACTION ACCOUNTS DEPOSIT REVENUE ($m) BUSINESS AND HOUSEHOLD DEPOSIT¹ MARKET SHARE National Australia Bank (%) 1,114 43 1,217 43 1,392 41 1,416 34 20.5% 20.6% 20.6% 20.7% 20.1% 20.2% 20.3% 20.4% 14.6% 14.5% 14.8% 14.8% 14.9% 14.7% 14.4% 14.4% 1,351 1,382 1,174 1,071 Mar 13 Sep 13 Mar 14 Sep Mar Sep Mar Aug 14 15 15 16 16 Mar 15 Sep 15 Mar 16 Sep 16 Business deposits -Household deposits ■ NII CUSTOMER DEPOSIT BALANCES BY PRODUCT² ($bn) 29 25 29 133 139 142 131 127 127 129 133 31 30 10 11 11 13 22 20 222 23 23 24 24 Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 ■NBIs Mar 16 Sep 16 ■Transaction Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 ■Savings Sep 15 Mar 16 ■Term deposits Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 Offsets (1) APRA Banking System (2) Spot volumes. Transaction and savings deposits account total was previously disclosed as on demand deposits National Australia Bank#3160 AUSTRALIAN BANKING: OTHER BANKING PRODUCTS PERSONAL LENDING BALANCE AND MARKET SHARE¹ CARDS BALANCE AND MARKET SHARE³ ($bn) ($bn) 9.9% 10.1% 10.4% 10.7% 13.6% 13.7% 14.0% 14.1%² 2.00 2.02 1.87 1.92 6.27 6.22 6.49 6.44 Mar 15 Sep 15 Mar 16 Personal Lending Market share Sep 16 Mar 15 Sep 15 Cards Mar 16 -Market share Sep 16 CARDS AND PERSONAL LENDING 90+ DPD AND AS A % OF TOTAL CARDS AND PERSONAL LENDING GLAS ($m) (1) (2) (3) CONSUMER CARDS 90+ DPD AS % OF OUTSTANDINGS 1.6% 1.4% 1.16% 1.14% 1.02% 1.03% 1.2% 1.0% 83 84 98 96 0.8% Mar 15 Sep 15 90+DPD Mar 16 90+DPD/GLA Sep 16 Sep 14 ―NSW/ACT Mar 15 - QLD Sep 15 SA/NT Mar 16 Sep 16 VIC/TAS -WA ― Total Personal loans business tracker reports provided by RFI, represents share of RFI defined peer group data Market share based upon the latest available market data (August 2016) APRA Banking system AUSTRALIAN BANKING: CUSTOMER ENGAGEMENT - NET PROMOTER SCORE¹ MORTGAGE CUSTOMERS 0 Mortgage Customers Net Promoter Score vs. peers² DEBT FREE Debt Free Net Promoter Score vs. peers² 10 -10 -20 -30 -40 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 ―NAB -Peer 1 -Peer 2 -Peer 3 0 -18 -10 -24 -24 -20 -25 -30 National Australia Bank -7 -12 -16 -17 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 NAB -Peer 1 -Peer 2 Peer 3 MICRO BUSINESS SMALL BUSINESS MEDIUM BUSINESS Micro Business Net Promoter Score vs. peers³ 0 Small Business Net Promoter Score vs. peers³ Medium Business Net Promoter Score vs. peers³ 0 -10 -20 -30 -40 Jan May Sep Jan May Sep Jan May Sep 14 14 14 15 15 15 16 16 16 ―NAB -Peer 1 Peer 2 - Peer 3 -10 -11 0 -16 -20 -20 -10 -22 -21 -26 -20 -21 -30 -25 -30 -40 Jan May Sep Jan May Sep Jan May Sep 14 14 14 15 15 15 16 16 16 ―NAB Peer 1 Peer 2 Peer 3 -40 Jan May Sep Jan May Sep Jan May Sep 14 14 14 15 15 15 16 16 16 ―NAB Peer 1 -Peer 2 - Peer 3 -2 -4 -8 -12 61 (1) (2) (3) Net PromoterⓇ and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld Roy Morgan Research, NAB defined Mortgage Customers and Debt Free, Australian population aged 14+, six month rolling average DBM Business Financial Services Monitor; all customers' six month rolling averages for Micro Business (<$1m), Small Business ($1m-<$5m) and Medium Business ($5m-<$50m) National Australia Bank#32AUSTRALIAN BANKING: DIGITAL AND DIRECT CONTINUED MIGRATION TO DIGITAL AND MOBILE % of value transactions via digital channels INCREASED DIGITAL ENGAGEMENT Mobile log-ons 73 69 66 13 19 24 76 31 ल 53 50 49 45 FY13 FY14 FY15 FY16 ■Internet Banking ■Mobile UPLIFT IN ONLINE SALES 62 Mortgage redraw Credit card opens Personal loan opens 6% 14% 24% 34% Transactions via Digital 12% FY15 FY16 FY15 FY16 DIRECT (CONTACT CENTRES) Credit card opens Personal loan opens 34% 12% FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 National Australia Bank AUSTRALIAN BANKING: DIGITAL - NAB PAY NAB PAY LAUNCHED 2016 FOR ANDROID AND IOS nab 1 2 3 4th • NAB Pay launched in January 2016 to enable customers to make contactless purchases using an Android¹ phone • NAB PayTag launched in September 2016 for Apple iOS customers STRENGTHENING CUSTOMER ENGAGEMENT >59,000 customers enabled NAB Pay 59,369 Dec 15 Mar 16 Jun 16 Customers with NAB Pay Sep 16 546,007 NAB PAY BENEFITS AND PRODUCTIVITY • Customers can apply, set up and use their new cards on their mobile devices • In less than 60 seconds, customers can register and start using NAB Pay to make purchases • Instantly replace lost or stolen cards without needing to wait for new cards to be delivered • Reduced fraud - around three times fewer fraudulent transactions compared to physical credit card and debit cards 5-7 days 63 >546,000 NAB Pay transactions 60 seconds Dec 15 Mar 16 Jun 16 Sep 16 Nab Pay Cumulative Transactions Card Delivery NAB Pay (1) With built-in NFC and running Android 4.4 or higher. National Australia Bank#3364 65 DIGITAL INITIATIVES NAB PROSPER Customer relationship platform providing personalised advice, empowering customers to make informed financial decisions Features: • Advice tailored to the customer . • Multi-channel support Convenient access to financial advice at all times • Financial education Delivered to date: • Two personalised advice modules - Retirement and Insurance • Now live to ~250,000 NAB customers When people plan, THEY PROSPER. Prepare for your financial future on your own terms, with NAB Prosper. I'm ready to prosper Not now PROQUO Online platform connecting Australian micro and small businesses to swap and trade services • Joint initiative between NAB and Telstra • Includes secure payment processing Platform live since July. Over 1,100 small business registered as users • • Proquo is open to any Australian business, not just NAB and Telstra customers XERO COLLABORATION Enables mutual customers of NAB and Xero to set up NAB bank feeds and make lending enquiries directly from within Xero accounting • Business customers can contact bank directly while working on their financials • Customers can send their latest financials with a click of the button - avoiding the need to manually collate and send 65% increase in the number of bank feeds set up each month as a result of collaboration nab + xero proquo nab+ TECHNOLOGY INVESTMENT IMPROVING CUSTOMER EXPERIENCE¹ 'CRITICAL' AND 'HIGH' PRIORITY INCIDENTS Investment in technology driving lower instance of technology incidents over FY13 - FY16 • 79% reduction in 'High' priority incidents 64% reduction in 'Critical' priority incidents Q1 Q2 Q3 Q4 Q1 Q2 FY13 FY13 FY13 FY13 FY14 FY14 Q3 Q4 FY14 FY14 Q1 FY15 ■Critical Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY15 FY15 FY15 FY16 FY16 FY16 FY16 ■ High (1) Critical Incidents - Significant impact or outages to customer facing service or payment channels. High Incidents - Functionality impact to customer facing service or impact/outage to internal systems National Australia Bank National Australia Bank#3467 20 AUSTRALIAN BANKING: MARKETS - MARKET SHARE TRENDS¹ GOVT AND SEMI-GOVT BONDS² (%) 20 FOREIGN EXCHANGE - CORPORATES AND FINANCIAL INSTITUTIONS³ (%) 15 15 10 5 0 2011 Peer 1 13 10 8 5 2012 2013 2014 2015 2011 2012 2013 2014 2015 Peer 2 Peer 3 NAB Peer 1 ―――――――Peer 2 -Peer 3 NAB DEBT MARKETS ORIGINATION4 – LEAD DEALER RELATIONSHIPS (Number of citations) INTEREST RATE HEDGING - CORPORATES5 (%) 25 40 35 30 20 25 20 15 15 10 5 2012 2013 2014 2015 Peer 1 Peer 2 Peer 3 -NAB 10 2016 2011 2012 2013 2014 2015 Peer 1 Peer 2 -Peer 3 NAB (1) 2015 (2) (3) (4) (5) All data is taken from the most recently published Peter Lee Associates surveys available Peter Lee Associates Debt Securities Investors Survey 2015 ('Most Active' Investors). Based on the four major domestic banks Peter Lee Associates Foreign Exchange Survey 2015. Based on top four banks by penetration Peter Lee Associates Debt Securities Origination Survey 2016. Based on top four banks by penetration Peter Lee Associates Interest Rate Derivatives Survey 2015. Based on top four banks by penetration 99 National Australia Bank 66 AUSTRALIAN BANKING: MARKETS - RELATIONSHIP STRENGTH INDEX¹ GOVT AND SEMI-GOVT BONDS² (Index) 700 FOREIGN EXCHANGE - CORPORATES AND FINANCIAL INSTITUTIONS3 (Index) 600 600 500 400 500 300 400 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Peer 1 -Peer 2 -Peer 3 NAB -Peer 1 Peer 2 Peer 3 ⚫NAB DEBT MARKETS ORIGINATION4 (Index) 550 500 450 INTEREST RATE HEDGING - CORPORATES5 (Index) 575 550 525 500 400 475 2012 2013 2014 2015 2016 2011 2012 2013 Peer 1 Peer 2 Peer 3 ⚫NAB Peer 1 Peer 2 -Peer 3 2014 ―NAB 2015 (1) (2) (3) All data is taken from the most recently published Peter Lee Associates surveys available Peter Lee Associates Debt Securities Investors Survey 2015 ('Most Active' Investors). Based on the four major domestic banks Peter Lee Associates Foreign Exchange Survey 2015. Based on top four banks by penetration (4) (5) Peter Lee Associates Debt Securities Origination Survey 2016. Based on top four banks by penetration Peter Lee Associates Interest Rate Derivatives Survey 2015. Based on top four banks by penetration National Australia Bank#3569 ADDITIONAL INFORMATION Group Australian Banking NZ BANKING NAB Wealth Group Asset Quality Capital and Funding Environmental, Social and Governance Economic Outlook Glossary TARGETED GROWTH IN AUCKLAND MARKET AUCKLAND INVESTMENT GAINING TRACTION • Investment in Auckland delivering strong volume growth with focus on priority segments (NZ$bn) +16.9% • Number of mortgage brokers in Auckland grown from 100 in June 15 to ~400 in FY16 • FTE investment concentrated on Auckland small business, broker and housing 13.0 10 15.2 14.5 14.0 13.5 MOCKREL HILL CKRE +18.8% 7.3 23 6.9 6.5 6.4 7.6 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 ■Auckland SME Lending Avg Volumes¹ ■ Auckland Housing Avg Volumes IMPROVED CUSTOMER EXPERIENCE ENABLED BY TECHNOLOGY AND PROCESS SIMPLIFICATION • All customers migrated to new Retail Digital Banking platform Net Promoter Score • Customer basics programme: 20 10 . Positively impacted ~1,000,000 customer interactions in FY16, enhancing customer experience 27 21 14 0 • Corresponding 9% YoY drop in complaints -10 -20 • Process simplification leveraging new technology to improve 30% of core operational processes in FY17 Sep 11 Sep 12 Small Business ($1m to $5m)² -Retail Wealth³ Sep 13 Sep 14 Sep 15 -Medium Business ($5m to $20m)² Sep-16 (1) Auckland SME includes housing products. December 15 - September 16 volumes based on new customer segmentation methodology Source: TNS Business Finance Monitor, 12 month roll (2) (3) Source: Camorra Research - Retail Market Monitor, 6 month roll National Australia Bank National Australia Bank#3670 71 NEW ZEALAND BANKING CASH EARNINGS AND UNDERLYING PROFIT¹ (NZ$m) 627 639 REVENUE V EXPENSE GROWTH (NZ$m) 636 641 1,034 1,058 1,051 1,060 39.4% 39.6% 39.5% 39.5% 432 418 405 404 407 419 415 419 Mar 15 Mar 15 Sep 15 Sep 15 Cash earnings Mar 16 -Underlying profit Sep 16 % Cost to income ratio NET INTEREST MARGIN: MARCH 16 v SEPTEMBER 16 2.31% (0.02%) (0.07%) 0.00% (0.02%) Mar 16 Revenue Sep 16 Expenses 2.20% Mar 16 Lending Margin Funding Mix Other (1) Underlying profit represents cash earnings before various items, including tax expense and the charge for bad and doubtful debts. It is not a statutory financial measure Sep 16 NEW ZEALAND BANKING: VOLUMES AND MARKET SHARE BUSINESS LENDING¹ (NZ$bn) RETAIL LENDING¹ (NZ$bn) CUSTOMER DEPOSITS¹ (NZ$bn) 36.4 48.8 50.5 34.7 44.7 45.8 1.3 32.9 33.3 1.3 1.3 1.5 26.8 27.9 24.7 25.7 37.9 36.4 34.8 35.1 33.3 33.4 31.4 32.0 20.0 20.1 22.0 22.6 National Australia Bank Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 ■Housing lending Mar 16 Sep 16 Unsecured personal Mar 15 Sep 15 Mar 16 ■BNZ Partners ■BNZ Retail Sep 16 LENDING MARKET SHARE² DEPOSIT MARKET SHARE² 27.2% 27.5% 26.5% 26.5% 24.6% 24.0% 24.4% 24.2% 22.2% 22.4% 22.6% 22.5% 18.1% 17.6% 17.6% 17.6% 14.8% 13.8% 14.0% 14.1% 15.8% 15.5% 15.5% 15.5% Mar 15 Sep 15 Mar 16 Aug 16 Mar 15 Sep 15 Mar 16 Aug 16 3 Business -Agribusiness -Housing Business deposits Total Retail deposits Personal deposits (1) Spot volumes (2) Source RBNZ: August 2016 (3) Source RBNZ: Retail deposits include both Personal and Business deposits National Australia Bank#37NEW ZEALAND BANKING: ASSET QUALITY B&DD CHARGE AND AS % OF GLAS¹ (NZ$m) TOTAL 90+ DPD AND GIAS AND AS % OF GLAS (NZ$m) 72 73 0.26% 0.24% 0.14% 31 23 0.11% 58 57 61 30 511 11 (12) Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 ■Specific B&DD charge ■Collective B&DD charge NET WRITE-OFFS TO GLAS (bps) 13bps 9bps 7bps 27bps 24bps 25bps 23bps 22bps 17bps 412 Sep 15 1,251 1,017 1.80% 823 1.20% 579 438 Mar 16 0.60% 428 0.00% Sep 16 Dairy Impaired Assets currently assessed as no loss 90+ DPD and GIAs Total 90+ DPD and GIAS as % GLAS (RHS) COLLECTIVE AND SPECIFIC PROVISION COVERAGE 49.0% 42.6% 44.3% 39.2% 0.84% 0.91% 0.90% 0.75% 6bps Mar 15 Sep 15 Mar 16 Sep 07 Sep 08 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 Specific Provisions as % of GIAs² (1) Half year B&DD as a % of GLAS annualised Sep 16 -Collective provisions as % of Credit Risk Weighted Assets (2) Consists only of impaired assets where a specific provision has been raised and excludes New Zealand dairy exposures currently assessed as no loss based on security held National Australia Bank NEW ZEALAND BANKING: LENDING MIX AND MORTGAGE PORTFOLIO BY GEOGRAPHY PORTFOLIO BREAKDOWN - TOTAL NZ$74.1BN MORTGAGE PORTFOLIO BREAKDOWN BY GEOGRAPHY Agriculture, Forestry and Fishing 20%. Commercial Property .11% Retail and Wholesale. Trade 4% Manufacturing. 4% Wellington 11% Canterbury. 14% Mortgages 47% Waikato 7% Bay of Plenty 6% Auckland Other 17% 45% Other Commercial. 12% Personal Lending 2% National Australia Bank#38NEW ZEALAND BANKING: HOUSING LENDING - KEY METRICS New Zealand housing lending Mar 15 Sep 15 Mar 16 Sep 16 Low Documentation 0.15% 0.13% 0.10% 0.08% Proprietary 100% 99.6% 97.1% 94.4% Third Party Introducer 0.0% 0.4% 2.9% 5.6% Variable rate lending drawn balance 25.5% 23.1% 21.1% 20.4% Fixed rate lending drawn balance 70.8% 73.5% 75.7% 76.7% Line of credit drawn balance 3.7% 3.4% 3.2% 2.9% Interest only drawn balance1 23.2% 23.8% 24.0% 25.1% Insured % of Total Portfolio² 8.5% 7.3% 6.1% 5.3% Current LVR on a drawn balance calculated basis 63.5% 63.1% 62.8% 62.6% LVR at origination 68.9% 68.4% 67.9% 67.8% Average loan size NZ$ ('000) 296 304 316 332 90+ days past due ratio Impaired loans ratio Specific provision coverage ratio Loss rate³ 0.17% 0.14% 0.17% 0.09% 0.16% 0.13% 0.11% 0.09% 36.9% 35.5% 47.0% 35.9% 0.04% 0.03% 0.02% 0.02% 74 75 (1) Excludes Line of credit (2) Insured includes both LMI and Low Equity Premium (3) 12 month rolling Net Write-offs / Spot Drawn Balances NEW ZEALAND BANKING: AGRIBUSINESS AND DAIRY PORTFOLIO AGRIBUSINESS PORTFOLIO AGRIBUSINESS NZ$14.7BN - 19.8% OF TOTAL GLAS DAIRY PORTFOLIO ■Fully Secured 60% ■Partially secured 38% ■Unsecured 2% Dairy 57% NZ$8.4bn Drystock 19% Forestry 5% Kiwifruit 3% Other 12% National Australia Bank - Services to Agriculture 4% FONTERRA MILK PRICE FORECASTS (INCLUDING DIVIDEND) 9 8 ■Fully Secured 56% 7 Partially Secured 43% 6 ■ Unsecured 1% 5 €2 (1) Source: Fonterra (2) Source: DairyNZ. Cost of production includes interest and rent, RBNZ FSR 4 2012 2013 2014 -Fonterra milk price (Inc Dividend)' 2015 2016 —Average cost of production (per kg)² 2017 (FC) National Australia Bank#39NEW ZEALAND BANKING: COMMERCIAL REAL ESTATE Total NZ$8.4bn 11.4% of Gross Loans & Acceptances Region Location Land 12% Tourism & Leisure 2% 76 Residential 9% Office 29% Industrial 15% Auckland Other Regions Total 47% 53% 100% Loan Balance < NZ$5m 22% 37% 30% Loan Balance > NZ$5m<NZ$10m 15% 14% 14% Loan Balance > NZ$10m 63% 49% 56% Loan tenor <3 yrs 97% 84% 90% Other .10% Loan tenor > 3 < 5 yrs 1% 3% 2% Loan tenor 5 yrs 2% 13% 8% Average loan size NZ$m 5.7 3.1 4.0 Security Level1 Fully Secured 65% 64% 64% _Retail 23% Partially Secured 30% 33% 32% Unsecured 5% 3% 4% 90+ days past due Impaired Loans 0.64% 1.07% 0.87% 0.00% 0.05% 0.03% Specific Provision Coverage 0.00% 45.8% 45.8% Trend Mar 15 Sep 15 Mar 16 Sep 16 90+ days past due 0.80% 0.76% 0.72% 0.87% Impaired Loans 0.57% 0.27% 0.20% 0.03% Specific Provision Coverage 21.5% 26.4% 28.5% 45.8% (1) Fully Secured is where the loan amount is less than 100% of the bank extended value of security; Partially Secured is where the loan amount is greater than 100% of the bank extended value of security; Unsecured is where no security is held and negative pledge arrangements are normally in place. Bank extended value is calculated as a discount to market value based on the nature of the underlying security NEW ZEALAND BANKING NET PROMOTER SCORE NET PROMOTER SCORE - BNZ PARTNERS¹ BNZ Partners Net Promoter Score vs peers NET PROMOTER SCORE - BNZ RETAIL¹ BNZ Retail Net Promoter Score vs peers 77 -10 -20 N½NWA 20 40 28 13 0 0 -10 -20 ប់៦。គឺ៖ ៖ ៖ ៖ 0 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 -BNZ -Peer 1 -Peer 2 - Peer 3 National Australia Bank 22212 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 -Peer 3 -BNZ -Peer 1 -Peer 2 -Peer 4 (1) Source: Partner - Business Finance Monitor data on a 12 month roll; Retail Market Monitor data on six monthly roll National Australia Bank#40ADDITIONAL INFORMATION Group Australian Banking NZ Banking NAB WEALTH Group Asset Quality Capital and Funding Environmental, Social and Governance Economic Outlook Glossary NAB WEALTH: INVESTMENTS MOVEMENT IN FUM AND FUA¹² 79 MOCKREL HILL CKRE NAB MORTGAGE SALES THROUGH ALIGNED ADVISOR NETWORK ($bn) 67% 67% 64% 18.2 9.0 (0.1) ($m) 0.1 0.2 1.6 168.4 Sep 15 188.4 197.4 Net Market Other Mar 16 funds returns flow Net Market Other Sep 16 funds returns flow 436 % Sep 14 Retail FUM NET FUNDS FLOW AND SPOT FUM BY PRODUCT GROUP COST TO INCOME RATIO 113% CAGR 998 1,983 Sep 15 Sep 16 National Australia Bank Product group 1H15 Net Funds Flow ($m) 2H15 Net Funds Flow ($m) 1H16 Net Funds Flow ($m)³ 2H16 Net Funds Flow ($m) Spot FUM at 30 Sep 2016 ($m) Retail Platforms³ 825 1,018 1,163 1,699 84,619 Business & Corporate (197) (187) (132) (355) 36,111 Superannuation 65.8% Off-sale Retail Products 64.3% 64.9% (969) (631) (560) (710) 11,486 58.3% and Other Wholesale (Investment Management, JANA and (641) 40 (303) (550) 65,136 Boutiques) Mar 15 Sep 15 Mar 16 Sep 16 Total Net Funds Flow (982) 240 168 84 197,352 (1) FUM and FUA on a proportional ownership basis (2) This includes the JBWere opening balance following the acquisition of the remaining 20% in January 2016 and other FUM/A (3) 1H16 net funds flow and spot FUM/A for Retail Platforms include JBWere, following the acquisition of the remaining 20% in January 2016 National Australia Bank#41ADDITIONAL INFORMATION Group Australian Banking NZ Banking NAB Wealth GROUP ASSET QUALITY Capital and Funding Environmental, Social and Governance Economic Outlook Glossary GROUP B&DD CHARGE B&DD CHARGE AS % OF GLAS MOCKREL HILL CKRE National Australia Bank 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 89 Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep 86 87 88 90 91 92 93 94 95 96 Sep 99 Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep 97 98 00 01 02 03 04 05 06 07 08 09 Sep Sep Sep Sep Sep Sep 10 11 12 13 14 15 16 81 B&DD CHARGE AND AS % OF GLAS 1 ($m) 0.41% 0.31% 0.18% 0.16% 0.14% 0.16% 942 0.12% 0.13% 722 426 399 349 375 425 Mar 13 299 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 (1) Ratios for all periods refer to the half year ratio annualised National Australia Bank#42ESTIMATED GROUP LONG RUN LOAN LOSS RATE - 1985 TO 2016 GROUP BUSINESS MIX - GLAS BY CATEGORY 1985 Personal lending 8% ESTIMATING LONG RUN LOAN LOSS RATE NAB Australian geography net write off rates as a % of GLAS 1985 - 20162 Long run average (1) (2) (3) (4) 82 83 2016 Home lending 16% Home lending 58% Home lending³ 0.03% Commercial1 76% Personal lending³ 1.39% Commercial³ 0.58% Australian average (1985-2016) 0.36% Personal lending 2% Group average4 based on 2016 business mix 0.28% Commercial 40% Group average4 based on 2016 business mix excluding 1991-1993 and 2008-2010 0.20% For 1985 Group business mix, all overseas GLAS are included in Commercial category Data used in calculation of net write off rate as % of GLAS is based on NAB's Australian geography and sourced from NAB's Supplemental Information Statements (2007 - 2015) and NAB's Annual Financial Reports (1985 - 2006). 2016 net write off data is NAB unaudited estimates Home lending represents "Real estate - mortgages" category; Personal lending represents "Instalment loans to individuals and other personal lending (including credit cards)" category; Commercial represents all other industry lending categories as defined by source document Group average is calculated by applying each of the Australian geography long run average net write off rates by product to the respective percentage of Group GLAS and acceptances by product as at 30 September 2016. Commercial long run average net write off rate has been applied to acceptances GROUP ASSET QUALITY - NEW IMPAIRED ASSETS GROUP ($m) AUSTRALIAN BANKING ($m) 1,291 1,046 522 300 677 679 769 746 476 460 642 570 National Australia Bank Mar 15 Sep 15 ■Impaired assets Mar 16 Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 ■NZ Dairy NZ BANKING (A$m) 125 99 Mar 15 Sep 15 ■Impaired assets 609 367 522 300 87 Mar 16 ■NZ Dairy 67 Sep 16 National Australia Bank#4384 85 GROUP ASSET QUALITY 90+ DPD & GIAS AS % OF GLAS BY PRODUCT ($bn) 0.64% 0.59% 0.55% 0.58% 0.58% 1.13% 1.76% 1.05% 1.09% 1.00% 1.00% 1.01% 1.05% 1.21% 0.73% 1.76 1.71 1.63 1.77 1.84 3.50 0.11 0.11 2.08 2.27 2.65 0.11 0.13 0.13 1.55 Sep 14 Mar 15 Mortgage Sep 15 Mar 16 Sep 16 as % GLAS Sep 14 Mar 15 Sep 15 Business Lending Mar 16 Sep 16 Sep 14 as % GLAS Mar 15 Sep 15 Other products Mar 16 Sep 16 as % GLAS NET WRITE-OFFS¹ 90+ DPD & GIAS TO GLAS 2 ($m) 0.20% 0.20% (%) 2.2% 1.8% 0.12% 0.10% 1.4% 511 516 366 1.0% 267 Mar 15 Sep 15 Mar 16 Sep 16 0.6% FY10 FY11 Net write-offs Net write-offs as a % of GLAs (half year annualised) NAB FY12 -Peer 1 FY13 FY14 -Peer 2 FY15 FY16 Peer 3 (1) Includes write-offs of fair value loans (2) FY16 based on latest peer results announcements GROUP PROVISIONS COLLECTIVE PROVISION COLLECTIVE PROVISION MOVEMENTS ($m) ($m) 3,054 2,910 2,978 2,811 320 252 300 259 230 224 225 144 2,978 2,434 2,504 2,453 2,408 Mar 15 Amortised Loans 39 (188) 100 (63) (55) 0.85% National Australia Bank 2,811 Sep 15 Mar 16 Sep 16 Mar 16 Overlays Fair Value Loans ■Fair Value Derivatives Volume and Transfer to credit specific quality provisions CP on derivatives and loans at fair value UK CRE Sep 16 sale 1 COLLECTIVE PROVISIONS AS % OF CRWAS SPECIFIC PROVISION BALANCES ($m) 0.08% Mortgage 700 Risk 602 Weights change 107 712 87 448 86 0.97% 0.99% 0.98% 92 0.85% 593 625 516 356 Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 Business ■Retail (1) A $55m benefit from the sale of a parcel of UK CRE loans was fully offset with other movements in the balance sheet including the de-recognition of loans and advances and the receivable on the consideration of the sale of the portfolio which results in a nil impact to cash earnings National Australia Bank#4486 87 GROUP PROVISION MOVEMENTS COLLECTIVE PROVISION ($m) 3,054 2,910 2,978 2,811 329 275 362 325 340 392 310 424 SPECIFIC PROVISION ($m) 712 700 20 602 5 95 ■Corporate Functions 148 10 448 91 18 84 2,385 2,311 2,238 2,062 NZ Banking ■Corporate Functions NZ Banking 612 532 501 346 Australian Banking Australian Banking Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 Mar 16 Sep 16 GROUP PORTFOLIO - $545.8BN GROSS LOANS AND ACCEPTANCES BY PRODUCT - SEP 2016 Housing Loans 58% Term Lending 34% Acceptances 2% Overdrafts 1% Leasing 2% Other 1% Credit Cards 2% GROSS LOANS AND ACCEPTANCES BY GEOGRAPHY - SEP 2016 Asia 1% United States 1% New Zealand 13% Europe 1% Australia 84% GROSS LOANS AND ACCEPTANCES BY BUSINESS UNIT - SEP 2016 NZ Banking 13%. Australian Banking 87% GROSS LOANS AND ACCEPTANCES BY INDUSTRY – SEP 2016 Personal Lending. 2% Other¹ 2% Manufacturing 2%. Financial, investment and insurance 4% Agriculture, forestry, fishing. and mining 7% Commercial property services 12% Real estate - mortgage 58% (1) Other includes: Real estate - construction, Government and public authorities Other commercial and industrial 13% National Australia Bank National Australia Bank#4588 89 RESOURCES EXPOSURES RESOURCES EXPOSURE AT DEFAULT ($bn) 12.1 11.5 10.5 10.5 Mar 15 Sep 15 Mar 16 Sep 16 RESOURCES 90+ DPD AND GIAS AND AS % OF RESOURCES EAD ($m) . ASSET QUALITY Resources EAD -1% of total Group EAD • Exploration & Production exposures to stronger rated investment grade customers are 56% • . Oil & Gas extraction exposure is largely to LNG projects and investment grade customers (90%) Mining Services exposures reduced to 14% of resources EAD in Sep 16 vs Sep 15 (17%). The portfolio is 9% investment grade, 91% partially or fully secured Resources 90+ DPD & gross impaired to EAD declined to 3.01% in Sep 16 from 3.08% in Mar 16, predominantly due to the impairment of a small number of individual exposures RESOURCES PORTFOLIO BREAKDOWN Iron Ore Mining 11% 1 3.08% 3.01% Coal Mining 9% 1.23% 324 315 0.61% 142 74 Mar 15 Sep 15 Mar 16 Sep 16 (1) Coal mining is composed of black coal mining (99.5%) and brown coal mining (0.5%) Gold Mining. 7% Oil & Gas Extraction 41% Other Mining 18% Mining Services 14% AGRICULTURAL EXPOSURES AGRICULTURE, FORESTRY & FISHING EXPOSURES Agriculture, Forestry and Fishing EAD $39.5bn September 2016 AUSTRALIAN AGRICULTURE, FORESTRY & FISHING - EXPOSURES EAD $24.4bn September 2016 Other Crop & Grain 8% Grain 10%. Cotton 5% Vegetables 3% ■Australia 62% ■ NZ 38% Dairy 7% AUSTRALIAN AGRICULTURE, FORESTRY & FISHING - ASSET QUALITY ($m) 1.32% Australian Agriculture portfolio - Well secured¹ 0.92% 0.71% 0.74% 285 207 167 180 Mar 15 Sep 15 90+DPD & Impaired Mar 16 Sep 16 as % EAD ■Fully Secured 79% ■Partially 19% Secured ■Unsecured 2% Forestry & Fishing 4% Beef 19% Sheep/Beef 6% Sheep 2% Other Livestock Services 11%. 1% Poultry 1% Mixed 23% (1) Fully Secured is where the loan amount is less than 100% of the bank extended value of security; Partially Secured is where the loan amount is greater than 100% of the bank extended value of security; Unsecured is where no security is held and negative pledge arrangements are normally in place. Bank extended value is calculated as a discount to market value based on the nature of the underlying security National Australia Bank National Australia Bank#46COMMERCIAL REAL ESTATE - GROUP SUMMARY¹ Total $61.5bn 11.3% of Gross Loans & Acceptances Aust NZ UK Region Asia Total Trend Mar 15 Sep 15 Mar 16 Sep 16 TOTAL CRE (A$bn) 53.0 8.0 0.3 0.2 61.5 Impaired loans ratio 0.58% 0.42% 0.30% 0.23% Increase/(decrease) on Sep 15 (A$bn) 1.9 1.3 (1.3) (0.3) 1.6 % of regional GLAS 11.5% 11.4% 6.2% 3.7% 11.3% Change in % on September Specific Provision Coverage 22.7% 23.4% 23.5% 28.3% (0.1%) 0.5% 3.9% (1.8%) 1.0% 2015 90 Group Commercial Property by type Industrial 15% Residential. 13% Tourism & Leisure 3% Office. 28% Group Commercial Property by geography Other 7% Land 6% VIC 24%. Retail 28% (1) Measured as balance outstanding at September 2016 per APRA Commercial Property ARF 230 definitions QLD 15% WA .8% Other Australia 8% New Zealand 13% Asia 0.3% NSW -United 32% Kingdom 0.5% ELIGIBLE PROVISIONS AND REGULATORY EXPECTED LOSS National Australia Bank Mar 16 Sep 16 Movement Non-Defaulted Defaulted Non-Defaulted Defaulted Non-Defaulted ($m) Defaulted General Reserve for Credit Losses 412 2,754 379 2,522 Specific Provisions 602 less: Provisions on standardised portfolio (8) plus: Partial write-offs on IRB portfolio Total Eligible Provisions (EP) Regulatory Expected Loss (EL) 712 33 (33) (232) 110 75 (75) (8) (63) 0 12 605 481 (124) 1,611 2,679 1,564 2,459 (47) (220) 1,485 2,567 1,564 2,528 79 19 (39) Shortfall in EP over EL (100% CET1 Deduction) 0 0 0 69 69 0 69 Surplus in EP over EL (Tier 2 capital for non- defaulted) 126 112 0 0 (126) (112) 91 National Australia Bank#47ADDITIONAL INFORMATION Group Australian Banking NZ Banking NAB Wealth Group Asset Quality CAPITAL AND FUNDING Environmental, Social and Governance Economic Outlook Glossary CREDIT RWA MOVEMENT CREDIT RWA MOVEMENT MARCH 2016 v SEPTEMBER 2016 ($bn) 93 303.5 3.8 MOCKREL HILL CKRE 25.3 (4.4) 1.6 1.7 National Australia Bank 331.5 Mar 16 Volume growth Validation and methodology Credit quality and Mark to market related portfolio mix credit risk FX Sep 16 National Australia Bank#4894 95 GROUP BASEL III CAPITAL RATIOS 18.16% 16.14% 13.53% 17.31% 15.52% 13.02% 19.61% 17.10% 14.00% 14.15% 12.44% 13.25% 14.14% 11.77% 12.19% 10.24% 9.69% 9.77% Sep 15 ■APRA Common Equity Tier 1 ratios APRA to Internationally Comparable CET1 Ratio Reconciliation Mar 16 Sep 16 APRA Tier 1 ratios APRA Total Capital ratios Equivalent Internationally Comparable ratios¹ CET1 NAB CET1 ratio under APRA 9.77% APRA Basel capital adequacy standards require a 100% deduction from common equity for deferred tax assets, investments in non consolidated subsidiaries and equity investments. Under Basel Committee on Banking Supervision (BCBS) such items are concessionally risk weighted if they fall below prescribed thresholds +87bps Mortgages - reduction in LGD floor from 20% to 15% and adjustment for correlation factor Interest rate risk in the banking book (IRRBB) - removal of IRRBB risk weighted assets from Pillar 1 capital requirements Other adjustments including corporate lending adjustments and treatment of specialised lending NAB Internationally Comparable CET1 (1) Internationally Comparable CET1 ratios align with the APRA study entitled "International capital comparison study" released on 13 July 2015 ROBUST FUNDING PROFILE GROUP STABLE FUNDING INDEX (SFI) AUSTRALIAN FUNDING GAP1 ($bn) 150 140 84% 86% 90% 91% 72% 130 20% 20% 20% 22% 16% 120 110 56% 64% 66% 70% 69% 100 Sep 08 Sep 10 Sep 12 90 Sep 14 Sep 16 ■Customer Funding Index ■Term Funding Index +128bps +33bps +175bps 14.00% National Australia Bank Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Aug 16 ―NAB Peer 1 Peer 2 -Peer 3 RELIANCE ON SHORT TERM WHOLESALE FUNDING² ($bn) 16% 11% 10% 9% 8% GROUP FUNDING PROFILE • Proportion of core assets funded by stable funding sources has steadily increased • Increase in stable funding supports transition to NSFR compliance • Reliance on short term funding has reduced significantly 50 28 Sep 11 Sep 13 13 Sep 14 6 0 Sep 15 Sep 16 Short Term Funding of Core Assets Offshore as % of Total Funding Liabilities and Equity (1) Australian funding gap = Gross loans and advances + Acceptances less Total deposits (excluding certificates of deposits). Source: APRA Monthly Banking Statistics August 2016 (2) September 2015 figures onwards presented on a continuing operations basis, prepared in accordance with AASB 9. Prior periods have not been restated per accounting methodology National Australia Bank#49ASSET FUNDING - SEPTEMBER 2016 96 ($bn) 778 Other Assets¹ 82 62 Other Liabilities¹ Repurchase Agreements² Reverse Repurchase Agreements 31 Short Term Funding Liquid Assets³ 118 Term Funding < 12 Months 778 55 35 92 37 Term Funding > 12 Months 120 Core Assets 547 Customer Deposits 391 Assets Shareholders' Equity 48 Liabilities & Equity (1) Other assets and liabilities include trading derivatives (2) Repurchase agreements entered into are materially offset by reverse repurchase agreements with similar maturity profiles as part of normal trading activities, noting the cash holdings in our Exchange Settlement Account with the RBA contribute to the difference between balances (3) Liquid assets are at market value and include non-regulatory qualifying securities (4) Shareholders' equity excludes preference shares and other contributed equity FUNDING PROFILE HISTORIC TERM FUNDING ISSUANCE ($bn) TERM FUNDING MATURITY PROFILE ($bn) 5.1 4.8 5.1 4.7 5.4 WAM² 4.2 yrs yrs yrs yrs yrs yrs 36 (4.0 yrs at Sep 15) 46 31 20 11 FY12 སྩོ。 ཚ8 28 27 33 21 21 30 26 30 20 32 18 28 20 15 7 FY13 FY14 ཡཎྜ 6 6 18 14 5 5 6 FY15 FY16 FY17 FY18 FY19 FY20 Beyond Tenor¹ Secured Senior and Sub Debt ■Secured Senior and Sub Debt National Australia Bank ADDITIONAL TIER 1 AND TIER 2 CAPITAL ISSUANCES AND REDEMPTIONS DEBT MATURITY PROFILE OF NWMH AND ASSOCIATED CET1 IMPACT4 ($bn) 2.2 1.3 (1.0) 1.6 1.5 0.4 (1.1) ($m) 5bp 210 13bp 490 2H17 1H18 ■Debt maturity Mar 15 AT1 issuances 3 Sep 15 Mar 16 AT1 redemptions Sep 16 ■T2 issuances (1) Weighted average maturity (years) of funding issuance (> 12 months) 1H17 (2) Weighted average remaining maturity of the Group's TFI qualifying term funding which only includes debt with more than 12 months remaining term to maturity (3) BNZ notes net of regulatory deduction for Level 2 basis (4) Estimated Level 2 CET1 impact based on 30 September 2016 RWA 97 National Australia Bank#5099 98 WHOLESALE FUNDING COSTS WHOLESALE TERM ISSUANCE CURVES¹ (bps) 220 AVERAGE LONG TERM WHOLESALE FUNDING COSTS² (bps) 200 200 180 160 140 120 100 80 60 60 40 20 20 0 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 3 Year 5 Year Mar 16 Jun 16 Sep 16 175 150 125 سمار 100 75 50 25 0 Sep 07 Sep 08 Sep 09 Sep 10 Sep 13 Sep 14 Sep 15 Sep 16 WAC of Term Funding Portfolio Forecast WAC of Portfolio New Issuance WAC (Rolling 6m average) (1) AUD Major Bank Wholesale Unsecured Funding rates over BBSW (3 years and 5 years) (2) NAB Ltd Term Wholesale Funding Costs >12 Months at issuance (spread to 3 month BBSW). Average cost of new issuance is on a 6 month rolling basis. Forecast assumption based on current issuance cost DIVERSIFIED AND FLEXIBLE FUNDING ISSUANCE ($36.4BN FY16) TYPE Issuer split: NAB Ltd 87%, BNZ 13% Subordinated Public 5% Subordinated Private 1% Senior Public Offshore 45% Private Placements 10% Secured Public. Domestic 6% Secured Public- Offshore 11% Senior Public Domestic 22% INVESTOR LOCATION Asia (ex. Japan) 23% Australia & New Zealand 27% Japan 4% Europe 18% UK Other 5% 2% USA 21% CURRENCY GBP 1% Other 8%. USD 44% JPY 1% EUR 16% AUD 30% TENOR > 5 years, 21%. < 2 years, 1% 3 years, 29% 4 years, 1% 5 years, 48%. National Australia Bank National Australia Bank#51DIVERSIFIED AND FLEXIBLE PORTFOLIO TYPE RMBS 2% Covered 19% Subordinated. 7% CURRENCY JPY 4% Senior 72% GBP 7% AUSTRALIAN BANK COVERED BOND ISSUANCE¹ ($bn) 50% 48% 42% 34% 26.9 29.0 28.6 26.5 26.7 27.2 20.3 NAB ■Issued Peer 1 Remaining capacity Peer 2 13.5 Peer 3 % of capacity utilised USD 32% Other 9% EUR 23% (1) Covered bond investor reports & APRA Monthly Banking Statistics as at August 2016. Remaining capacity based on current rating agency over collateralisation (OC) and legislative limit 100 LIQUIDITY LIQUIDITY COVERAGE RATIO (QUARTERLY AVERAGE)' LIQUID ASSET (SPOT) ($bn) ($bn) 118% LCR 115% LCR 125% LCR 121% LCR 146 150 148 147 AUD 25% National Australia Bank Eligible Regulatory Liquidity 144 148 154 147 40 44 47 45 104 104 102 107 124 131 119 121 Mar 15 Sep 15 Mar 16 Sep 16 Mar 15 Sep 15 Net Cash Outflows HQLA (including CLF) LIQUIDITY OVERVIEW¹ ■High Quality Liquid Assets & CLF Eligible Sep 16 ■Internal RMBS INCREASE IN DEPOSIT QUALITY (AVERAGE LCR)³ Mar 16 20 96 Quarterly Average ($bn) High quality liquid assets Sep 15 Mar 16 Sep 16 93 92 Alternative liquid assets² 54 51 RBNZ Securities 3 5 15 5 5 91 51 Total LCR Liquid Assets 150 148 147 Net outflows due to Retail deposits Wholesale funding 97 2 19 18 18 83 86 169 13 32 مامانا 72 54 73 49 165 155 Other 15 17 17 Sep 15 Mar 16 Net cash outflows Quarterly average LCR 131 115% 119 121 125% 121% Retail / SME Deposits CYBG Operational Deposits Sep 16 Non Operational Deposits (1) September 2015 and March 2016 reported average LCR figures include CYBG (2) Committed Liquidity Facility (CLF) value used in LCR calculation is the undrawn portion of the facility. Approved CLF of $55.4 billion during the period 1 January 2016 to 31 December 2016 (3) Deposits included in 30 day LCR calculation (at call or maturing in 30 days). Operational and Non Operational Deposits include corporate deposits 101 National Australia Bank#52KEY REGULATORY CHANGES IMPACTING CAPITAL AND FUNDING Fundamental Review of the Trading Book & Credit Valuation Adjustment (CVA) Net Stable Funding Ratio (NSFR) Leverage Ratio Revised standardised approach to credit risk & internal model approaches to credit risk Capital Floors Total Loss Absorbing Capacity (TLAC) & Resolution Revised standardised approach to operational risk Interest Rate Risk in the Banking Book (IRRBB) Securitisation Description Aims to replace current trading book capital rules with a more coherent and consistent framework. The proposed CVA risk framework takes into account the market risk exposure component of CVA along with its associated hedges Aims to improve resilience in the banking sector by requiring banks to balance the amount of 'stable' assets they have on their balance sheet with the amount of 'stable' funding A non-risk based supplementary measure to the risk-based capital requirements Refresh of standardised credit risk standards to reduce RWA variability and strengthen the existing regulatory capital standard. BCBS proposed changes to the internal ratings-based approaches (IRB) and adoption of model- parameter floors for credit risk A capital floor based on standardised approaches for credit and market risk. This may limit the influence of internal ratings-based models Enhanced loss-absorbing and recapitalisation capacity of banks in resolution. Initially intended for G-SIBS, but is expected for Australian D-SIBS. The TLAC holdings standard has been issued by BCBS, covering capital deductions for holding TLAC instruments Proposed revisions to standardised approach for operational risk removes the advanced measurement approaches and introduces a standardised measurement approach to calculate operational risk, using financial statement information and internal loss experience Sets supervisory expectations for banks' identification, measurement, monitoring and control of IRRBB as well as its supervision; via an enhanced Pillar 2 approach APRA proposal seeks to simplify securitisation for originating ADIs, and incorporate the updated BCBS securitisation framework International regulation status Final Basel Committee on Banking Supervision (BCBS) standard for FRTB released January 2016 Final BCBS standard released October 2014 Consultation released April 2016 Standardised: Second BCBS consultation released December 2015 IRB: BCBS consultation released March 2016 First BCBS consultation released December 2014 Financial Stability Board (FSB) final standards issued in November 2015 Second BCBS consultation released March 2016 Domestic regulation status Future APRA consultation expected APRA industry consultation released September 2016 Disclosure requirements implemented, minimum requirement to be determined Future APRA consultation expected Future APRA consultation expected Future APRA consultation expected, structure and timing of implementation currently unknown Future APRA consultation expected Final BCBS standard released April 2016 Future APRA consultation expected Final BCBS standard released December 2014 APRA industry consultation commenced November 2015 102 National Australia Bank KEY REGULATORY CHANGES IMPACTING CAPITAL AND FUNDING EXPECTED TIMELINES 103 Fundamental Review of the Trading Book (FRTB) FSI Response Internal Model Approaches to Credit Risk Revised Standardised Approach to Credit Risk Standardised Measurement Approach to Operational Risk Capital Floors Sovereigns Interest Rate Risk in the Banking Book (IRRBB) Securitisation Total Loss Absorbing Capital (TLAC) Net Stable Funding Ratio (NSFR) Leverage Ratio 2016 Final BCBS standard released Implementation of mortgage risk weights BCBS consultation on revision BCBS consultation on revision BCBS consultation on revision BCBS consultation expected Final BCBS standards released APRA consultation APRA consultation BCBS consultation 2017 2018 2019 APRA consultation expected Implementation expected APRA guidence expected APRA consultation expected Final BCBS standards expected Final BCBS standards expected Final BCBS standards expected Final BCBS standards expected APRA consultation expected APRA consultation expected APRA consultation expected BCBS consultation expected Implementation to be advised APRA consultation expected Implementation Implementation APRA consultation expected Implementation to be advised Implementation BCBS final calibration expected APRA consultation expected Implementation National Australia Bank#53ADDITIONAL INFORMATION Group Australian Banking NZ Banking NAB Wealth Group Asset Quality Capital and Funding ENVIRONMENTAL, SOCIAL AND GOVERNANCE Economic Outlook Glossary MOCKREL HILL CKRE National Australia Bank CORPORATE RESPONSIBILITY OUR APPROACH TO CORPORATE RESPONSIBILITY • To achieve NAB's vision of becoming Australia and New Zealand's most respected bank, NAB aims to make a positive and sustainable impact on the lives of its customers, people, shareholders and society. NAB is focused on supporting customers and communities through: • Financial inclusion and resilience . Social cohesion • Environmental wellbeing • NAB's ESG Risk Management framework applies across the value chain (suppliers, workforce and operations, customers) EXTERNAL COMMITMENTS TO ENCOURAGE SUSTAINABLE PERFORMANCE¹ BUSINESS NETWORK UN GLOBAL COMPACT Network Australia WE SUPPORT Shared Value Initiative SUSTAINABLE DEVELOPMENT GOALS CLEAN ENERGY COUNCIL MEMBER CDP DRIVING SUSTAINABLE ECONOMIES • FINANCE INITIATIVE EXTERNAL ASSESSMENTS OF NAB'S ESG PERFORMANCE¹ Fortune 'Change the World' 2016 Ranking - First and only Australian company selected; recognition of NAB's Shared Value approach and specific financial hardship assistance program Dow Jones Sustainability Index series - NAB a global industry leader FTSE4Good Index series UNEP Natural Capital Finance Alliance • • Finance sector leadership on natural capital CDP - NAB has been awarded a position on the CDP 2016 Climate A List recognising NAB for climate change leadership and as a world leader for corporate action on climate change. EQUATOR PRINCIPLES 105 (1) Further information on the initiatives NAB participates in, and external assessments of NAB's ESG performance is available on our website: http://www.nab.com.au/about-us/corporate-responsibility/responsibility-management-of-our-business/performance-and-reporting/memberships-commitments-and-recognition National Australia Bank#54PROGRESS IN NAB'S SOCIAL PRIORITY AREAS - 2016 • . . · • FINANCIAL INCLUSION AND RESILIENCE Assisted more than 440,000 Australians with microfinance products & services since 20051 Supported over 150,000 microfinance loans, with a value over $190 million, since 20051 Committed an additional NZ$50m in funding for the New Zealand community finance program Announced the launch of two 'Good Money' stores in Queensland. To provide access to financial assistance, support services and products under the one roof Continued to support customers in getting back on track following financial hardship in 2016: • Over 21,000 customers assisted • 93% of customer accounts up-to-date within 90 days • Over $70m in savings for NAB through avoided defaults • • • SOCIAL COHESION Total community investment of $48.8 million, including over 23,000 days of employee volunteering in 2016 Published report card for 2015-2017 'Elevate' status Reconciliation Action Plan, outlining progress to date: • • More than 200 Indigenous Australians employed as at 30 September 2016 10 year partnership with CareerTrackers commenced Established a cross-business working group on the role of the financial services industry in family violence, support includes: • Family Violence Assistance Grants (up to $2,500) for customers in financial hardship Domestic violence leave and support resources available to employees Helped finance the third Social Impact Investment issued by the NSW Government - a program³ to reduce reoffending by parolees and minimise re- incarceration ENVIRONMENTAL WELLBEING • In 2016, $7.3 billion in financing activities to support an orderly transition to a low- carbon and green economy • Announced five climate change commitments in December 2015 • • Established NAB's first science-based emissions reduction target for its operations - consistent with scientific estimates considered to be required to maintain global warming below the two degree threshold Provided over $92 million in discounted loans to renewable energy and energy efficient assets from June 2015 to date, with support from the Clean Energy Finance Corporation Achieved close to 80% of NAB's key office buildings operating at a 4 Star NABERS Energy rating or better Met five out of six 2016 Group Environmental targets, missed NAB's waste diverted from landfill target due to an overall decrease in paper usage and waste, thereby lowering amount of waste that could be recycled (1) In partnership with Good Shepherd Microfinance (2) Supported by Good Shepherd Microfinance, Victorian and South Australian Governments and NAB, Good Money stores offer safe, affordable and responsible financial services for people on low incomes who are otherwise excluded from mainstream financial services (3) Delivered by the Australian Community Support Organisation (ACSO) 106 National Australia Bank NAB'S CONTRIBUTION TO SOCIETY - 2016 NAB REVENUE • Supports all stakeholders and business partners • NAB revenue is shown after paying interest to 4.5 million Australian and New Zealand retail and business customers who have deposited over $390 billion with us BORROWERS ● Retained as capital to support new lending and further strengthen capital position for our existing loans • NAB lends more than $2 billion a month to businesses and more than $4 billion a month to homeowners • Total of over $300 billion in Home Lending and $200 billion in Business Lending SHAREHOLDERS (INCL. SUPER FUNDS) Approx. 582,000 shareholders Approx. 80% of NAB's profits distributed • in dividends Retained as capital4 $1.3bn Operating expense $3.0bn Dividends2 $5.1bn NAB REVENUE¹ $16.6bn Taxes paid in Australia³ $2.8bn Personnel expense $4.4bn SUPPLIERS & COMMUNITY 1,700+ contracted suppliers • Over 23,000 volunteering days contributed by employees this year Supported over 22,000 microfinance loans at a value of more than $25.6 million in partnership with Good Shepherd Microfinance OUR PEOPLE • Employ over 35,000 people (NAB Group) • Over 50% of our workforce directly engages with customers 107 Figures based on NAB's FY16 cash earnings (1) Revenue shown net of $0.8bn of bad and doubtful debts (2) Dividends paid in FY16 (3) Includes income tax, GST, FBT, payroll tax and other taxes borne by NAB (4) Excluding the loss on sale of CYBG and the life insurance business and other items categorised as non-cash earnings GOVERNMENT • Australia's fifth largest taxpayer • Signatory to the Voluntary Tax Transparency Code National Australia Bank#55CORPORATE RESPONSIBILITY PERFORMANCE - KEY METRICS 2013 2014 2015 2016 Net Promoter Score (Priority customer segments) (Australia) -19 (=4th) -18 (3rd) -16 (3rd) -14 (1st) Cumulative number of Australians assisted with 268,864 335,934 394,277 449,844 microfinance products/services Enterprise Employee Engagement score¹ (%) Not comparable 44 56 61 Employee voluntary turnover rate¹ (%) 11% 10% 10% 10% Community investment¹ ($m) 55.2 56.5 54.4 48.8 Cumulative number of volunteering hours contributed (hrs) (Australia) 764,816 922,001 1,084,712 1,222,798 Progress towards September 2022 $18bn clean energy financing commitment ($bn) Target established and defined 7.3 Gross Greenhouse Gas emissions (Scope 1, 2 and 3) (tCO2-e)² 311,024 297,691 276,584 231,5993 Progress towards target percentage (90%) of material suppliers that are signatories to NAB Group Supplier Sustainability Principles (%) 110088 Target established and defined 32 47 Further information (including detailed definitions and calculations) on listed measures and additional performance indicators will be made available in the 2016 Annual Review and Dig Deeper (published 14 November 2016) - http://digdeeper.nab.com.au (1) Historical figures have been restated to exclude discontinued operations Calculated for the environmental reporting year 1 July 30 June. Gross totals are prior to renewable energy purchase 91 (2) (3) (4) Emissions from all major operations under NAB's control during the 2016 environmental reporting year, including one month of emissions from Great Western Bank and seven months of emissions from CYBG There are variances in terminology and definition of a material or strategic supplier across NAB's operations in different geographic regions. For a full explanation on the thresholds across operations, see the 2016 Dig Deeper National Australia Bank ESG RISK MANAGEMENT ESG RISK APPROACH NAB's ESG Risk Principles provide an overarching framework to integrate ESG risk considerations into day-to-day decision- making, including operational risk (direct operations and procurement), credit risk and investment due diligence and assessment processes This year, NAB has taken a number of steps to further integrate ESG considerations in the risk management framework, as outlined below • • ENVIRONMENT Updated Group Environmental policies, including NAB's Environmental Reporting and Offset Management Policy Established post-2016 environmental targets including a science-based GHG emissions reduction target Continued participation in the United Nations Environment Program Finance Initiative/World Resources Institute / 2 Degrees Investing Initiative Portfolio Carbon Initiative (PCI) Improved disclosure of carbon risk exposure in the lending book SOCIAL • Developed a Human Rights Policy • Integrated specific consideration of modern slavery into the Group Procurement Policy and Group Outsourcing and Offshoring Policy • Established new supplier sustainability targets for the period 2016 to 2020 • Took further steps to enhance the culture of NAB (see next slide) GOVERNANCE • NAB's investment advisory business, JANA became a signatory to the Principles for Responsible Investment • Updated and published NAB's Political Donations Policy - NAB no longer makes political donations • Changes to BNZ credit policy have made it easier for bankers to identify and manage. ESG risk 109 Further detail on NAB's approach to ESG risk management, including additional performance indicators and case studies, will be available in our 2016 Dig Deeper (published 14 November 2016), as well as on NAB's website: www.nab.com.au/about-us/corporate-responsibility/shareholders/ESG-risk-management National Australia Bank#56ENGAGEMENT AND CULTURE VALUES-ALIGNED CULTURE Embedding organisational values throughout NAB • • Employee engagement increased from 56 to 61, exceeding the global high performing organisation benchmark for the first time¹ The most significant driver of engagement is NAB's vision to become Australia and New Zealand's most respected bank Trust in NAB's whistle-blower processes has further improved (84) from a high base (82)1 EMPLOYEE ENGAGEMENT¹ High performing organisation benchmark of 60 61 56 44 RISK CULTURE UPDATE Banks are in the business of taking risk. NAB's aspirational risk culture is "our people understanding and living 'Do the right thing'. It's about taking the right risk, with the right controls for the right return." This applies not only to risks that might impact the bank's ability to perform, but also helping customers to manage their risk to enable them to reach their potential Culture is a driver of conduct and is a key focus area for NAB's Board and management NAB's chairman and NAB Senior Executives have signed the Banking & Finance Oath to show NAB is committed to upholding the highest ethical standards • NAB has committed to the Australian Bankers Association initiatives to increase transparency, accountability, build trust and confidence in the banking industry • NAB is making it easier for customers when things go wrong. NAB has appointed an Independent Customer Advocate to support its Retail and Small Business customers in resolving serious complaints NAB is reaffirming support for employees who blow the whistle on inappropriate conduct Advocacy, NAB values, risk and compliance are embedded into how NAB assesses and manages performance 110 2014 2015 ■NAB Engagement 2016 (1) As measured in NAB's annual employee engagement survey "Speak Up, Step Up" conducted by Right Management. Historical engagement figures have been re-stated to exclude discontinued operations and provide consistent coverage for trend over time ELECTRICITY GENERATION AND ENVIRONMENTAL FINANCING ENVIRONMENTAL FINANCING • NAB committed to five climate change actions in November 2015. This included a commitment to undertake environmental financing activities of $18 billion to 30 September 2022 to help address climate change and support the orderly transition to a low-carbon economy ELECTRICITY GENERATION EXPOSURES BY FUEL SOURCE EXPOSURE AT DEFAULT² ($bn) 5.2 5.3 5.3 5.1 5.1 4.9 3.2 3.0 3.0 2.9 2.7 . Recognised as a 'green bond pioneer' by the London Stock Exchange and Climate Bonds Initiative for work developing the Australian green bond market 3.0 1.9 2.0 2.3 2.3 2.2 2.4 • Arranged and led the $300m Victorian Government Green Bond, the world's first Climate Bond Standard Certified Green Bond issued by a semi-government authority AGGREGATE AMOUNT OF FINANCING TOWARDS $18BN TARGET¹ Mar 14 Sep 14 ■Renewable Mar 15 Sep 15 Mar 16 ■Non-Renewable Sep 16 ELECTRICITY GENERATION EXPOSURES BY FUEL SOURCE EAD $5.1bn September 2016 Green bonds $350.0m Mortgages for new home construction $5,734.4m Asset finance $57.7m $7.3bn Towards our 2022 target of $18bn (%) Commercial property $186.8m Hydro 13%. Specialised finance (incl. project finance) $702.8m Advisory services, underwriting and arranging Wind 26% $44.8m Other/Mixed Renewables 9% Fossil fuel 52% 111 (1) Corporate finance $246.3m A document outlining NAB's approach to measuring progress against its $18bn financing will be published at the same time. the 2016 Dig Deeper on 14 November 2016, and made available on the website at: www.nab.com.au/about-us/corporate-responsibility/shareholders/environmental-performance (2) Prepared in accordance with NAB's methodology (based upon the 1993 ANZSIC standard). Excludes exposure to counterparties predominantly involved in transmission and distribution. Vertically integrated retailers have been included and categorised as renewable where a large majority of their generation activities are sourced from renewable energy. More detail at https://www.nab.com.au/about-us/corporate-responsibility National Australia Bank National Australia Bank#57ADDITIONAL INFORMATION Group Australian Banking NZ Banking NAB Wealth Group Asset Quality Capital and Funding Environmental, Social and Governance ECONOMIC OUTLOOK Glossary AUSTRALIA REGIONAL OUTLOOK MOCKREL HILL CKRE National Australia Bank • Real GDP growth was moderate in Q2, though the year-ended rate lifted to 3.3% - the fastest pace since mid-2012 Activity remains variable by industry and state. Non-mining sectors (especially services) robust, but mining related industries struggling • The NAB Business Survey is showing above-average conditions for the non-mining economy, though this has moderated recently • Real GDP growth forecast is solid at 3.0% in 2016 and 2.8% in 2017, with support from LNG exports and growth in net services exports (including tourism and education). Domestic demand growth to remain subdued as mining contracts further, despite support from dwelling construction. There is potential upside from state government spending and farm GDP • Real GDP is forecast to slow to 2.6% in 2018 due to LNG exports flattening, dwelling construction cycle downturn and fading benefit from currency depreciation since 2013. There is potential upside from further lowering of interest rates and currency depreciation • Nominal GDP growth forecast is below historical average due to subdued commodity prices and weak wages growth. This will continue to challenge corporate profits, government revenue, and Australia's AAA rating ⚫ Amidst a weak outlook for inflation, we expect two further rate cuts from the RBA in mid-2017. Further deterioration could prompt non- conventional monetary policy tools (e.g. asset purchases) • Credit growth is forecast to remain solid. APRA's imposed 'speed limit' has slowed investor housing credit growth, but this has been largely offset by owner-occupier credit growth ECONOMIC INDICATORS (%) CY14 CY15 CY16(f) CY17(f) CY18(f) GDP growth1 2.7 2.4 3.0 2.8 2.6 Unemployment² 6.1 5.8 5.7 5.6 5.6 19 Core Inflation³ 2.2 2.0 1.6 1.8 2.0 Cash rate² SYSTEM GROWTH (%)4 2.5 2.0 1.5 1.0 1.0 FY14 FY15 FY16(f) FY17(f) FY18(f) Housing 6.0 7.2 7.0 6.7 6.4 Personal 0.8 1.0 (0.5) (0.1) 1.5 Business 2.6 5.1 6.3 5.0 6.2 Total lending 4.5 6.1 6.3 5.8 6.1 System deposits 6.7 7.0 6.1 6.7 6.7 (1) Average for year ended December quarter on average of previous year (2) As at December quarter (3) December quarter on December quarter of previous year (4) Average for year-ended September (bank fiscal year end) on average of previous year 113 National Australia Bank#58NZ REGIONAL OUTLOOK • The New Zealand economy remains on a solid footing. Real GDP rose by 3.6% over the year to the June quarter 2016; its fastest pace since late 2014 • Factors supporting the economic growth include: strong population growth due to high net inward migration, construction, tourism, robust employment and investment trends, along with low interest rates • Constraints on growth are: emerging capacity constraints domestically, mixed commodity export prices, the robust NZ dollar and tepid international conditions • Dairy prices remain far from strong. However they have rebounded enough, since the recent low in April 2016, for Fonterra to increase its forecast of the 2016/17 farmgate milk price by $1 to $5.25 per kg of milk solids. This is now slightly above break-even for most dairy farmers. Non- dairy commodity prices generally remain mixed-to-strong • High house price inflation is now broadening beyond Auckland The labour market continues to firm, although nominal wage growth remains moderate The Reserve Bank of New Zealand cut its OCR in August 2016 to a historically low 2.0%, while indicating that further policy easing will be required to meet its inflation target • Credit growth was 7.5% yoy in August, around the level it has been since the start of 2016. Strength is most evident in housing credit, although new loan-to-value restrictions are expected to slow growth. Agriculture and consumer credit growth has been slowing ECONOMIC INDICATORS (%) CY14 CY15 CY16(f) CY17(f) CY18(f) GDP growth1 3.8 2.5 3.4 3.1 1.9 Unemployment² 5.5 5.0 5.0 5.1 5.3 Inflation³ Cash rate² SYSTEM GROWTH (%)4 0.8 0.1 10 1.3 1.5 1.9 3.5 2.5 1.75 1.5 2.5 FY14 FY15 FY16(f) FY17(f) FY18(f) Housing 5.4 5.3 8.2 7.6 6.1 Personal 4.6 6.0 2.9 3.1 4.3 Business 3.4 6.0 6.8 6.0 5.6 Total lending 4.6 5.6 7.4 6.8 5.8 (1) (2) As at December quarter (3) Average for year ended December quarter on average of previous year December quarter on December quarter of previous year (4) Average for year-ended September (bank fiscal year end) on average of previous year 114 Household retail deposits 8.8 10.5 9.8 7.0 6.7 AUSTRALIAN AND NZ ECONOMIES CONTINUE TO PERFORM WELL GDP (INDEXED)1 AUSTRALIA AND NZ UNEMPLOYMENT RATE² (%) Q4 2005 100 135 130 125 120 7.0 Australia 6.5 New Zealand 6.0 New Zealand 5.5 Australia 115 United States 5.0 110 105 100 95 Eurozone 4.5 Japan 4.0 3.5 National Australia Bank 3.0 90 Mar 06 Mar 08 Mar 10 Mar 12 Mar 14 Mar 16 Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016 (1) Henderson centred seven period moving average. Source: NAB (2) Source: NAB 115 National Australia Bank#59AUSTRALIA CONTINUES TO TRANSITION AWAY FROM MINING REAL GDP GROWTH - YEAR ENDED %1 10.0 Non-mining MINING v NON-MINING INVESTMENT' 12 8.0 6.0 4.0 2.0 0.0 -2.0 Men Men Mining badly hypnoter 20 -10 10 Non-mining 8 6 4 10 Mining Forecast -20 0 1990 1995 2000 2005 2010 2015 1987 1992 1997 2002 2007 2012 2017 (1) Source: NAB, ABS 116 RESULTING IN DIVERSE CONDITIONS BY INDUSTRY AND REGION NAB BUSINESS CONDITIONS BY INDUSTRY¹ Manufacturing NAB BUSINESS CONDITIONS BY STATE² 50 50 Mining Construction -Retail 40 -Wholesale Transport/Utilities 40 -Finance, Property, Business -Household services 30 30 20 10 0 -10 -20 -30 20 20 10 10 -10 -20 -30 National Australia Bank -40 -40 2009 2010 2011 2012 2013 2014 2015 2016 2008 2010 2012 2014 2016 2008 2010 2012 2014 2016 -Australia NSW Vic QLD -SA WA -Tas (1) (2) 117 13 period Henderson trend. Source: NAB Monthly Business Survey Source: NAB Monthly Business Survey National Australia Bank#60ECONOMIC INDICATORS SUGGEST NON-MINING STATES ARE THRIVING EMPLOYMENT GROWTH (JOBS CREATED IN PAST 3 YEARS)¹ RETAIL SALES BY STATE - AUGUST 2016¹ (000's) 250 200 150 100 50 0 -50 NSW Vic Tas Non-mining States (1) Source: NAB, ABS 118 (%) 7 6 5 4 3 2 1 0 -1 Year-on-year Growth -2 NSW VIC ACT TAS ACT Qld SA WA NT Partly Mining Mining Non-mining States SA Partly Mining QLD NT WA AUS Mining AUS National Australia Bank SME CONDITIONS AND CONFIDENCE ESPECIALLY STRONG, HIGHEST IN SIX YEARS SME BUSINESS CONDITIONS & CONFIDENCE¹ Index 30 SME BUSINESS CONDITIONS & CONFIDENCE BY INDUSTRY¹ Index 30 20 10 0 -10 -20 -30 SME Conditions SME Confidence 25 ■SME Conditions ■SME Confidence 2008 2009 2010 2011 (1) Source: NAB Quarterly SME Survey 119 2012 2013 2014 2015 2016 20 15 10 5 0 5 Health Business Finance Accom, cafes & rest Wholesale Manufacturing Transport Property Retail Construction National Australia Bank#61CHINA ECONOMIC GROWTH SUPPORTING THE AUSTRALIAN TRANSITION CHINA NOMINAL GDP BY INDUSTRY¹ % yoy 30 25 20 15 Services CHINA RETAIL SALES & TOURISM DEBITS¹ Retail sales (CNY b) Tourism debits (US$b) 3000 30 2500 25 2000 Retail sales (LHS) 1500 20 15 10 10 1000 GDP 5 500 Tourism debits (RHS) 5 Industry & construction 0 0 0 Mar 06 Mar 08 Mar 10 Mar 12 Mar 14 Mar 16 2006 2008 2010 2012 2014 2016 AUSTRALIA SHORT TERM PASSENGER ARRIVALS PER MONTH² AUSTRALIA EDUCATION EXPORTS3 ('000 persons, 3mma) 120 100 80 60 UK ($b) 6 New Zealand 5 China 4 3 Share of total (%). 30 Share of total education exports (RHS) 25 20 15 2 10 40 USA 20 1 Japan Value of exports to 5 China (LHS) 0 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 (1) Source: CEIC Source: ABS, 3mma denotes three month moving average Source: ABS (2) (3) 120 National Australia Bank HOUSING - COMPARISON WITH IRELAND AUSTRALIAN DWELLING COMPLETION v ANNUAL POPULATION GROWTH (000's)¹ 500 IRELAND DWELLING COMPLETION v ANNUAL POPULATION GROWTH (000's)³ 160 450 400 350 300 250 200 M 150 100 50 (1) (2) (3) 121 0 1984 1988 1992 140 120 100 80 60 40 20 0 -20 -40 1996 2000 2004 2008 2012 2016 1984 1988 -Completions -Population 1992 1996 2000 2004 2008 -Completions -Population 2012 2016 Under construction² Source: NAB, ABS 2016 dwellings under construction as at Q2 2016 Source: NAB, Thomson Reuters National Australia Bank#62HOUSING-STRONGER SERVICABILITY WITH LOW INTEREST RATE ENVIRONMENT HOUSEHOLD INTEREST PAYMENTS (% OF DISPOSABLE INCOME)¹ 12 AUSTRALIAN INTEREST RATES² (%) 18 -Cash Rate Standard Variable Rate 11 10 16 14 12 10 9 8 7 8 6 4 2 6 0 2006 2008 2010 2012 2014 2016 1989 (1) Source: RBA (2) Source: NAB Monthly Business Survey, RBA 122 1992 1995 1998 2001 2004 2007 2010 2013 2016 HOUSING-APARTMENT OVERSUPPLY DEPENDENT ON FOREIGN DEMAND HOUSING APPROVALS TO POPULATION RATIO¹ SHARE OF DEMAND FROM OVERSEAS BUYERS² 250 200 150 100 50 50 Long-run average = 100 (%) 18 16 Houses Apartments 14 12 10 8 Existing dwellings New dwellings * National Australia Bank m 0 4 NSW Vic Queensland SA WA Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 (1) Source: NAB, ABS (2) Source: NAB Residential Property Survey 123 National Australia Bank#63NEW ZEALAND NZ GROWTH SOLID, UNEMPLOYMENT BELOW 5YR AVERAGE¹ STRONG MIGRATION: MANY GO TO AUCKLAND - INADEQUATE SUPPLY RESPONSE LEADS TO HOUSE PRICE GROWTH² (%) NZ GDP (yoy) 7 (%) NZ Unemployment rate 10 Number (6 mth average) 7000 5 8 6000 5000 3 6 Net long-term, permanent migration - New Zealand (LHS) 4000 1 4 3000 2000 -1 2 1000 Number (6 mth average) 1800 1600 1400 1200 1000 800 600 -3 0 Dec 00 Dec 05 Dec 10 Dec 15 Sep 04 Sep 09 Sep 14 0 New building consents - 400 Auckland Region (RHS) -1000 200 Mar 09 Sep 10 Mar 12 Sep 13 Mar 15 Sep 16 FONTERRA MILK PRICE FORECASTS (INCLUDING DIVIDEND) 9 $'000s 1200 8 7 6 5 1000 800 600 Average House Prices - Auckland City 4 2012 2013 2014 2015 2016 2017 (FC) 400 Fonterra milk price (Inc Dividend)³ Average cost of production (per kg)4 Mar 09 Sep 10 Mar 12 Sep 13 Mar 15 Sep 16 124 (1) Source: NAB, Econdata DX/Statistics NZ (2) Source: Econdata DX, Thomson Reuters Datastream (Statistics New Zealand, QV) Source: Fonterra (3) (4) Source: DairyNZ. Cost of production includes interest and rent, RBNZ FSR ADDITIONAL INFORMATION Group Australian Banking NZ Banking NAB Wealth MOCKREL HILL Group Asset Quality Capital and Funding Environmental, Social and Governance Economic Outlook GLOSSARY CKRE National Australia Bank National Australia Bank#64GLOSSARY Assets 90+ days past due Australian Banking Average assets Banking Business lending Capital ratios Cash Earnings CET1 Common Equity Tier 1 Capital Assets 90+ days past due consist of well-secured assets that are more than 90 days past due and portfolio-managed facilities that are not well secured and between 90 and 180 days past due. Australia Banking offers a range of banking products and services to retail and business customers ranging from small and medium enterprises through to some of Australia's largest institutions. Australia Banking comprises the Personal Banking and Business Banking franchises, Fixed Income, Currencies and Commodities (FICC), Capital Financing, Asset Servicing and Treasury. Represents the average of assets over the period adjusted for disposed operations. Disposed operations include any operations that will not form part of the continuing Group. These include operations sold and those which have been announced to the market that have yet to reach completion. Banking operations include the Group's: - Retail and Non-Retail deposits, lending and other banking services in Australian Banking, NZ Banking and NAB Wealth - Wholesale operations comprising Global Capital Markets and Treasury, Specialised Finance and Financial Institutions business within Australian Banking, and - NAB UK CRE operations and Group Funding within Corporate Functions and Other. Lending to non-retail customers including overdrafts, asset and lease financing, term lending, bill acceptances, foreign currency loans, international and trade finance, securitisation and specialised finance. As defined by APRA under APS111 - Capital Adequacy: Measurement of Capital (unless stated otherwise). Refer to page 2, Section 1 - Profit Reconciliation of 2016 Full Year Results Announcement for information about, and the definition of cash earnings. Common Equity Tier 1 (CET1) capital is recognised as the highest quality component of capital. It is subordinated to all other elements of funding, absorbs losses as and when they occur, has full flexibility of dividend payments and has no maturity date. It is predominately comprised of common shares; retained earnings; undistributed current year earnings; as well as other elements as defined under APS111 Capital Adequacy: Measurement of Capital. CLF Committed Liquidity Facility Continuing operations Core assets Corporate Functions and Other CPS CTI Banking cost to income ratio Customer deposits Customer risk management Discontinued Operations Distributions Dividend payout ratio CFI Customer Funding Index Customer deposits (excluding certain short dated institutional deposits used to fund liquid assets) divided by core assets. DRP Dividend Reinvestment Plan Made available by the RBA for qualifying ADIs to access in order to meet LCR requirements under APS 210 - Liquidity. Continuing operations are the components of the Group which are not discontinued operations. Represents gross loans and advances including acceptances, financial assets at fair value, and other debt instruments at amortised cost (classified in comparative periods as investments held to maturity). The Group's 'Corporate Functions' business includes functions that support all businesses including Group Funding, Other Corporate Functions activities and the results of NAB UK CRE and Specialised Group Assets (SGA) (closed as at 31 March 2015). Group Funding acts as the central vehicle for movements of capital and structural funding to support the Group's operations, together with capital and balance sheet management. Other Corporate Functions activities include Enterprise Services and Transformation, and Support Units (which includes Office of the CEO, Risk, Finance, Strategy, People and Governance & Reputation). Cents Per Share Represents banking operating expenses )before inter-segment eliminations) as a percentage of banking operating revenue (before inter-segment eliminations). Interest bearing, non-interest bearing and term deposits (including retail and corporate deposits). Activities to assist customers to manage their financial risks (predominantly foreign exchange and interest rate risks). Discontinued operations are a component of the Group that either has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations, which is part of a single co-ordinated plan for disposal. Payments to holders of other equity instrument issues such as National Income Securities, Trust Preferred Securities, Trust Preferred Securities II and National Capital Instruments. Dividends paid on ordinary shares divided by cash earnings per share. Instead of receiving cash dividends, shareholders can elect to reinvest dividends to buy more shares without paying brokerage and other administration costs. 126 GLOSSARY DVA Derivative Valuation Adjustment EAD Exposure at Default EPS Cash earnings per share- diluted FTE Full-time Equivalent Employees FUM/A Consist of Credit Valuation Adjustment (CVA), Funding Valuation Adjustment (FVA) and Overnight Index Swap (OIS) adjustment. CVA adjusts the fair value of over-the-counter derivatives and credit risk. FVA reflects the estimated present value of future market funding costs or benefits associated with funding uncollateralised derivatives. EAD is an estimate of the total committed credit exposure expected to be drawn at the time of default for a customer or facility that the NAB Group would incur in the event of a default. It is used in the calculation of RWA. Calculated as cash earnings adjusted for distributions on other equity instruments and interest expense on dilutive potential ordinary shares. This adjusted cash earnings is divided by the weighted average number of ordinary shares, adjusted to include treasury shares held by a controlled entity of the Group employee share scheme trust and dilutive potential ordinary shares. Includes all full-time staff, part-time, temporary, fixed term and casual staff equivalents, as well as agency temps and external contractors either self- employed or employed by a third party agency. Note: This does not include consultants, IT professional services, outsourced service providers and non- executive directors. Funds under Management and Administration Consist of: - Retail loans (excluding unsecured portfolio managed facilities) which are contractually past due 90 days with security insufficient to cover principal and arrears of interest revenue National Australia Bank Internationally comparable IRB Internal Ratings Based approach LCR Liquidity Coverage Ratio Leverage ratio LVR Loan to Value Ratio Markets & Treasury Income NAB Wealth NPS Net Promoter Score Estimate of NAB's CET1 and leverage ratio calculated on rules and those applied to global peers. Methodology aligns with the APRA study entitled "International capital comparison study" released on 13 July 2015. Refers to the processes employed by the Group to estimate credit risk. This is achieved through the use of internally developed models to assess the potential credit losses using the outputs from the probability of default, loss given default and exposure at default models. LCR measures the amount of high quality liquid assets held that can be converted to cash easily and immediately in private markets, to total net cash flows required to meet the Group's liquidity needs for a 30 day calendar liquidity stress scenario. As defined by APRA (unless otherwise stated). A non-risk based supplementary measure to the risk-based capital requirements. Mortgage loan to bank value of property expressed as a percentage. NAB risk management comprises NII and OOI and is defined as management of interest rate risk in the banking book, wholesale funding and liquidity requirements and trading market risk to support the Group's franchises. Customer risk comprises OOI. Includes FX. NAB Wealth provides superannuation, investments and insurances solutions to retail, corporate and institutional clients. NAB Wealth operates one of the largest networks of financial advisers in Australia. Net of revenues generated by interest-bearing assets and the cost of interest- bearing liabilities. NII as a percentage of average interest earning assets. Net Promoter Score measures the net likelihood of recommendation to others. of the customer's main financial institution for retail or business banking. Net PromoterⓇ and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld. GIAs Gross Impaired Assets - Non-retail loans which are contractually past due and there is sufficient doubt about the ultimate collectability of principal and interest, and NII Net Interest Income - Impaired off-balance sheet credit exposures where current circumstances indicate that losses may be incurred. NIM - Unsecured portfolio managed facilities are also classified as impaired assets when they become 180 days past due (if not written off). Net Interest Margin GLAS Gross Loans and Acceptances Group Housing lending HQLA NAB and its controlled entities. Mortgages secured by residential properties as collateral. High Quality Liquid Assets Impaired - currently assessed as no loss Eligible assets that include cash, balances held with Central Banks along with securities issued by highly rated Governments and supranationals. NSFR Net Stable Funding Ratio Currently assessed as impaired but no loss due to the value of the security held being sufficient to cover the repayment of principal and interest amounts due. NZ Banking 127 The NSFR is defined as the ratio of the amount of available stable funding to required stable funding. NZ Banking comprises the Retail, Business, Agribusiness, Corporate and Insurances franchises in New Zealand, operating under the 'BNZ' brand. It excludes BNZ's Markets operations. National Australia Bank#65GLOSSARY Overnight OIS Index Swap ΟΟΙ Other operating income Other banking products Residential Mortgage RMBS Backed ROE Securities Cash Return on Equity Risk-weighted RWAs assets SFI SME Stable Funding Index Small and Medium Enterprise Term Funding TFI Index Total TSR Shareholder Returns Underlying profit Watch loans Interest rate swap involving the overnight rate being exchanged for a fixed interest rate. Revenue derived from non-interest bearing products, such as fees and premiums. Personal lending, credit cards (consumer and commercial), investment securities and margin lending. Where a bank sells a pool of mortgages to a related special purpose vehicle (SPV), and the SPV in turn issues debt securities. Internal RMBS is where those securities are held entirely by the bank which originated the mortgages. These securities are eligible for use as collateral in repurchase agreements with the Reserve Bank of Australia. Calculated as cash earnings (annualised) divided by average shareholders' equity, excluding non-controlling interests and other equity instruments and adjusted for treasury shares. A quantitative measure of the Group's risk, required by the APRA risk-based capital adequacy framework, covering credit risk for on- and off-balance sheet exposures, market risk, operational risk and interest rate risk in the banking book. Term Funding Index (TFI) plus Customer Funding Index (CFI). A segment of NAB business lending which supports business customers with lending typically up to $25m, excluding the Specialised Businesses. Term wholesale funding (with a remaining maturity to first call date greater than 12 months) divided by core assets. Measured against Australian Financial Services firms as listed in our 2015 Annual Financial Report. Underlying profit is a performance measure used by NAB. It represents cash earnings before various items, including income tax expense and the charge to provide for bad and doubtful debts. It is not a statutory financial measure and is not presented in accordance with Australian Accounting Standards nor audited or reviewed in accordance with Australian Auditing Standards. Loan facilities where customers are experiencing operating weakness and financial difficulty but are not expected to incur loss of interest or principal. 128 DISCLAIMER The material in this presentation is general background information about the NAB Group current at the date of the presentation on 27 October 2016. The information is given in summary form and does not purport to be complete. It is intended to be read by a professional analyst audience in conjunction with the verbal presentation and the 2016 Full Year Results Announcement (available at www.nab.com.au). It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. No representation is made as to the accuracy, completeness or reliability of the presentation. This presentation contains statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believe", "estimate", "plan", "project", "anticipate", "expect", "intend", "likely", "may", "will", "could" or "should" or, in each case, their negative or other variations or other similar expressions, or by discussions of strategy, plans, objectives, targets, goals, future events or intentions. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, which may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. The Group disclaims any responsibility to update any forward-looking statement contained in this presentation to reflect any change in the assumptions, events, conditions or circumstances on which a statement is based, except as required by law. Further information on important factors that could cause actual results to differ materially from those projected in such statements is contained in the Group's Annual Financial Report. 129 For further information visit www.nab.com.au or contact: Ross Brown Executive General Manager, Investor Relations Mark Alexander Mobile | +61 (0) 417 483 549 Natalie Coombe Senior Manager, Investor Relations Mobile | +61 (0) 477 327 540 Head of Corporate Affairs, Group Media Mobile | +61 (0) 412 171 447 National Australia Bank National Australia Bank