By Scott Murdoch and Shivangi Lahiri
April 20 (Reuters) - Australia's largest business lender, National Australia Bank, on Monday said it expects to incur credit impairment charges of A$706 million ($503 million) in the first half, as the Iran war roils the global economy and financial markets.
The bank said it was now predicting more bad debts to occur as the likelihood of an Australian "downside economic scenario" was rising due to the Middle East conflict.
NAB shares were down as much as 3.8% on
Monday as the S&P/ASX200 was off 0.24% in early trading. The ASX200 financials index was 0.67% lower, dragged down by NAB.
The impairment charge would be up from A$348 million a year earlier and A$485 million in the second half.
NAB said it would increase its provisioning by A$300 million in the first half of 2026, which ended in March. The bank reports those results on May 1.
Of that increase, it is setting aside A$201 million more to cover new provisioning for the transport and agriculture sectors as fuel and diesel supply remained tight and prices were likely to remain elevated for longer.
It said it added to its provisioning for construction and commercial real estate borrowers.
NAB said second-quarter interest-rate volatility, a weaker New Zealand dollar and the provisioning increase would cut the group's common equity tier 1 capital ratio by about 20 basis points as of March 31.
NAB said it also expected to apply a 1.5% discount to the first-half dividend reinvestment plan to raise up to A$1.8 billion to help shore up its balance sheet.
The bank is the second major Australian lender to boost its provisioning on the back of the Middle East tensions after Westpac last week said its credit impairment charges would rise.
Westpac said higher inflation and elevated interest rates would create a more challenging operating environment for some of its customers.
Also on Monday, NAB said its first-half result would include an accelerated amortisation charge of A$949 million after tax from changes to its software capitalisation policy.
($1 = 1.4047 Australian dollars)
(Reporting by Scott Murdoch Shivangi Lahiri in Bengaluru; Editing by Lisa Shumaker, Neil Fullick and Thomas Derpinghaus)
