A major Australian bank has suffered a $8.7 billion crash after its profit tanked and it warned of pressures in home lending under a dwindling economy.

National Australia Bank on Thursday revealed its earnings of $6.1 billion were 13.4 per cent below its 2025 financial year result.

The bank’s CEO Andrew Irvine warned there is a risk the economy could fall into recession as higher inflation and interest rates weigh on spending.

These blows sparked a major sell off in the bank, sending the share price down 7.3 per cent as of just before 12.30pm.

This has wiped $8.7 billion from the company’s market capitalisation.

Mr Irvine noted the bank remained unsure how the five interest rate rises since the beginning of the year would impact customers.

He also noted that small business stresses were lifting and the bank was watching escalating mortgage arrears for owners who had borrowed against a family home.

“We’ve seen a little bit more stress emerge in what I would call customers who use business income to service the home loan… that’s something we’ll need to look at,” he told investors.

The bank’s annual report, released on Thursday, provided a sobering reading on Australia’s economic future.

It said unemployment could gradually rise to 5.5 per cent by early 2028, meaning approximately 125,000 Australians would be out of work.

NAB said it expected the rate to stabilise following the increase.

“While labour market indicators remain resilient at this stage, a forecast multi-year period of below trend economic growth is expected to result in a gradual rise in the unemployment rate to around 5.5 per cent by early 2028 before stabilising,” NAB said in a statement.

On top of an unemployment spike, NAB also predicts the nation’s already-slowing economic growth to decelerate further.

“In Australia, economic growth is slowing, weighed down by 125bps of RBA cash rate increases since February 2026 to tackle inflationary pressures,” the statement said.

“Real GDP growth is forecast to slow down from an annualised level of around 2.9 per cent over 2H25 to 1.4 per cent over 2026 and 1.0 per cent over 2027, before some improvement in 2028.”