The market may be pushing higher today, but the same cannot be said for National Australia Bank Ltd (ASX: NAB) shares.

In morning trade, the banking giant's shares are down 3% to $38.11.

Why are NAB shares sinking?

Investors have been selling NAB shares on Thursday following the release of its full year results.

It was a difficult 12 months for the big four bank, with revenue and earnings falling year on year.

NAB posted a 2% decline in revenue and an 8.1% fall in cash earnings to $7.1 billion. Management advised that this mainly reflects lower net interest margins (NIM) and lower Markets & Treasury (M&T) income, partially offset by volume growth and higher fee income.

The bank's NIM decreased by 3 basis points (bps) to 1.71% in FY 2024. Though, excluding a 3 bps increase from M&T, its NIM would have declined by 6 bps. This primarily reflects home lending competition, higher term deposit costs, and deposit mix impacts, which were partially offset by higher earnings on deposits and capital as a result of the higher interest rate environment.

Also heading in the wrong direction were the bank's expenses. They increased by 4.5% during the 12 months. Management notes that key drivers include higher personnel expenses due to salary-related and restructuring-related costs, as well as continued investment in technology modernisation and compliance capabilities including fraud and cyber security. This was partially offset by productivity benefits achieved through continued process improvements and simplification.

Commenting on its investments, NAB's CEO, Andrew Irvine, said:

Consistent investment to deliver better customer outcomes has supported another year of strong growth in our leading SME franchise, with Business & Private Banking (B&PB) increasing deposits by 7% and business lending by 8%.

However, things weren't so positive in Australian housing. This was due to the bank refusing to be too competitive with its rates to protect its profits. He adds:

In Australian housing, our growth was sub-system at 3% as we balanced growth against competitive pressures. We will continue to manage portfolio returns through a disciplined approach in this dynamic market.

Though, this still couldn't stop NAB's Personal Banking segment from recording a disappointing 19.6% decline in cash earnings for the year.

Outlook

NAB appears positive on its outlook in a difficult environment. It said:

We move forward with optimism and confidence in our strong foundations and evolved strategy. Customer centricity, simplification and speed will become the hallmarks of NAB going forward. This is expected to drive leading customer advocacy, underpinning sustainable growth and attractive returns for shareholders.