National Australia Bank (ASX: NAB) plans to cut 2,500 roles, or about 6% of its workforce, in fiscal 2027, including up to 1,500 before the end of 2026. It will also materially reduce its use of consultants and contractors, with an expected restructuring charge of around $300 million pretax in fiscal 2027.

Why it matters: With revenue growth slowing, management is pulling the cost lever. Credit growth is moderating, and mortgage competition remains intense, limiting top-line growth. Cutting costs helps preserve profitability while maintaining investment in technology and artificial intelligence.

  • NAB says its strategy is unchanged. Cuts are focused on corporate functions and senior management, with no material impact on customer-facing roles. ANZ and Westpac are cutting too, so whatever cost advantage NAB gains will likely be competed away through pricing rather than show up in margins.
  • The key execution risk is in business banking, where relationship management and credit decision-making are important. If leaner management structures slow approvals or weaken customer relationships, competitors could take share. Management argues the opposite, expecting faster decisions and less duplication.

The bottom line: We retain our $33 fair value estimate for wide-moat National Australia Bank and make no changes to our forecasts ahead of the fiscal 2026 result on Nov. 5. Shares remain overvalued.

Coming up: Management will update the fiscal 2027 cost outlook at the result. We estimate gross annual savings of around $400 million, or around 4% of operating costs. We will assess how much of the savings hit the bottom line versus how much is spent on technology.

Bears say: Workforce reductions on this scale risk disrupting execution, particularly if experienced staff leave voluntarily. That could slow innovation and weaken customer service. But we view the changes as largely removing excess capacity built during a period of stronger credit growth.

Bulls say

  • Management focus is on the successful, lower-risk, and profitable domestic banking. Economies of scale, pricing power, a strong balance sheet, and high credit ratings provide a robust platform to drive growth.
  • As Australia’s biggest business bank, National Australia Bank has the most to gain from strong demand for business credit.
  • NAB has the ability to achieve cost savings and drive operational efficiency improvements.

Bears say

  • A slowdown in core earnings growth could come from slower business loan growth, margin compression, falling fee income, and a worse-than-expected loan loss outcome.
  • If stress returns to global credit markets wholesale funding costs could increase materially.
  • Regulatory, compliance, remediation, and customer refund risk are difficult to predict.