National Australia Bank – 2H16 Earnings

Posted on | by Leon Hinde | Leave a Comment on National Australia Bank – 2H16 Earnings

National Australia Bank delivered 2H16 earnings which showed strong organic capital generation and underlying earnings trends that were relatively strong compared to their banking peers. In addition, it’s also worth noting that the SME business segment is showing early signs of a pickup in credit growth; this is an area where NAB has traditionally led its competitors.

NAB trades on almost a 10% discount to its peers and we may begin to see scope for this discount gap to close.

Consistent across all the major banks, we continue to see mortgage margins under pressure. This remains a concern, especially for Westpac and CBA as they’re likely be impacted the greatest by declining mortgage margins.

NAB FY17 underlying profit is expected to be $10b on EPS of $2.30 and DPS of $1.70 placing the stock on a forward yield of 6.5%.

Financials globally are getting a boost following the US election, however, we remain cautious and look to sell call options into the rally.

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Chart – NAB

NAB 2H16 Earnings Result

Posted on | by Leon Hinde | Leave a Comment on NAB 2H16 Earnings Result

Shares of the National Australia Bank (NAB) are pushing back toward the $28.00 level after announcing that its final dividend will be unchanged at 99 cents per share as full-year cash earnings  rose 4.2% to $6.48 billion.

Forward guidance suggests a drop in FY17 dividend to 85 cents as bad and doubtful debt charges rose 7.0% to $800 million, expenses rose 2.2% and net interest fell to 1.88%. Based on these figures, the FY17 growth forecast of -1% is the lowest in the sector, which is likely to limit further out performance to peer banks in the near-term.

The forward guidance equates to NAB trading on a P/E multiple of 12x , which is a 6% discount to peers, and a forward yield of 6.2%

Chart NAB
Chart NAB

NAB to Report FY16 Result on Thursday

Posted on | by Leon Hinde | Leave a Comment on NAB to Report FY16 Result on Thursday

NAB is scheduled to report its FY16 result on Thursday and we’re expecting FY16 cash earnings of $6.4b. The final dividend will likely be around $0.98 fully franked & we continue to expect the dividend to be cut next year.

We are forecasting a 2H16 credit impairment charge of $500m which is an increase of $125m on the 1H16 number.

Based on a slight reduction in dividends the FY18 yield is 6.75%.

Selling covered calls at or near $28.50 into early next year, with a view towards collecting the upcoming dividend is our preferred strategy.

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Chart NAB.ASX