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54 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

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