ALGO Engine Buy Signal For NAB

Posted on | by Todd | Leave a Comment on ALGO Engine Buy Signal For NAB

The ALGO engine triggered a buy signal for NAB at $30.40 on Friday.

NAB shares have dropped over 11% since posting an intra-day high of $34.00 on May 1st. Several internal momentum indicators are showing an overbought condition.

With US equity markets stabilizing after Wednesday’s sharp sell off, it’s likely that all the local banking names will get a lift when the ASX re-opens on Monday.

We see scope for a corrective bounce into the $32.50 area, and suggest looking to buy NAB shares outright, or consider buying the $32.00 call options into June.

NAB Shares Still Pointing Lower

Posted on | by Todd | Leave a Comment on NAB Shares Still Pointing Lower

On May 4th, we posted a report that the NAB’s H1 results would likely lead to a sell off back to the January lows of $30.50.

After going ex-dividend today, NAB shares have traded down to $31.65. A combination of the new bank levy and increased bad debt provisions will likely continue to weigh on the stock price.

We maintain our $30.50 target and suggest buying put options into June or selling covered calls to enhance portfolio returns.

 

NAB Posts Mixed Results

Posted on | by Todd | Leave a Comment on NAB Posts Mixed Results

NAB announced a 2.3% increase in its H1 cash profit to $3.29 billion, which was largely in line with the street’s expectations, but much better than the $1.74 billion loss for the March 2016 half-year result.

While cash earnings grew, net interest margin fell 11 basis points to 1.82%. Charges for bad debts were up 5.1% to $394 million.

The bank maintained its interim dividend at 99 cents per share, fully franked.

Shares of NAB raced to a high of $33.80 at the open but have now settled back into the low $33.00 handle. Our near-term target is around the January lows of $30.50.

 

Australian Bank Earnings

Posted on | by Leon Hinde | Leave a Comment on Australian Bank Earnings

On 2nd May, ANZ will report their half-year earnings. The market is expecting a net profit of around $3.7b and DPS for the half year of $0.80.

4th May, NAB will report their half-year earnings.  Net profit should be around $3.4b and DPS of $1.00.

5th May, Macquarie Bank reports. Net profit is expected to be similar to last year at $2.15b and DPS of $2.52

8th May, WBC report their half-year result. Net profit should be $4b and DPS $0.95

On average, the market is looking for approximately 3% underlying EPS growth among the banks and dividends to remain steady, or the same as the previous 12 months.

Charts – MVB (Vaneck Aust Bank ETF)

 

 

Banks – Chart Update

Posted on | by Leon Hinde | Leave a Comment on Banks – Chart Update

US banks, (see chart below of JP Morgan), are breaking to the upside of their recent consolidation range, and this is likely driving the rebound in the share price of the Australian banks.

NAB reported a 1% fall in earnings following weak revenue growth and a pickup in expense growth. Bendigo Bank failed to deliver growth at the top or bottom line.

CBA reported slightly ahead of expectations with underlying profit growth of 2.8% or $4.9b for the half. ANZ’s quarterly update, (released Friday), reported a 31% rise in profits to $2b for the 3 months to December.

Across all banking results, the NIM or net interest margins, remain under pressure, as does top line revenue growth. These are the same concerns which caused the 10% sell off in banks at the start of this year.

We’ll watch with interest how prices behaves in both the XJO and our major banks this week, as we commence trading with price levels similar to the peak of early January.

Chart – CBA
Chart – ANZ
Chart – WBC
Chart – NAB
CHART – JPM

 

 

 

 

 

 

 

NAB – Q1 Profit

Posted on | by Leon Hinde | Leave a Comment on NAB – Q1 Profit

The National Australia bank (NAB) announced that Q1 profits have dropped 1% to $1.6 billion and rising staff wages and increased redundancy costs diluted the bank’s earnings.

In an update this morning, NAB reported revenue increased by 1%, but expenses, including a 5% pay rise for staff, grew faster. The bank said the rise in staffing costs was mainly due to a new enterprise agreement that came into effect in October and redundancy payments to staff who left the bank.

US banks rallied on Friday night which is helping to support our local bank names today. We give the bounce the benefit of the doubt but a break below recent support levels will likely see another 5 – 7% correction to the downside.

 

Chart – NAB

 

Early Days on The Bank Hedge

Posted on | by Leon Hinde | Leave a Comment on Early Days on The Bank Hedge

We’ve been running a hedge on the Australian banks; CBA through an in-the-money European March option, NAB using an in-the-money American February option and WBC a longer-term call option. In ANZ our preference has been to exit the trade altogether.

On Friday, our domestic banks started to see some profit taking and the catalyst could’ve been selling ahead of the US banking results and/or the announcement of weaker export data out of China.

JP Morgan and BoA’s results , released last night, were adequate on the bottom line but both companies missed on the revenue front. Increased dividends and share-buybacks helped support what otherwise would’ve been viewed as weak results.

Chart – CBA
Chart – WBC
Chart – NAB
Chart – ANZ

 

 

Australian Bank Profit Announcements – Key Dates

Posted on | by Leon Hinde | Leave a Comment on Australian Bank Profit Announcements – Key Dates

Bank profit announcements start in February with the following key dates worth noting.

SUN 9 February, BEN 13 February, CBA 15 February along with 1Q17 trading updates from ANZ and NAB in February.

Following the recent rally in bank shares, we see the current trading range as full value, therefore, placing the banks at risk of being buffeted by any increase in market volatility.  Although net interest margins have improved, the prospects of earnings growth is modest with the outlook between 1% – 4% growth at both top and bottom-line.

We also remain concerned that the cycle for bad debts is likely to rise from the current historic low levels.

Charts – Aust Bank ETF

 

 

ASX Banks and Financials

Posted on | by Leon Hinde | Leave a Comment on ASX Banks and Financials

Currently, ASX leading Financials are being dragged higher as the US equity rally continues into the lead up to their fourth quarter earnings results. We’re somewhat sceptical of the valuation support and yesterday started hedging our banking exposure in client portfolios. This was done through using in-the-money European-style calls over CBA and slightly in the money February calls over NAB, as two examples.

In the case of CBA, we stay exposed to the February dividend and franking credit but have hedged a price pullback of up to 5% between now and March.

In NAB, we’ve hedged to a similar extend but without the need to protect the dividend. NAB’s next payment period is not until May

Chart – ANZ
Chart – NAB
Chart – WBC
Chart – ASX
Chart – CPU