National Australia Bank Limited

NAB Details

FY20 Financial and Operational Highlights: National Australia Bank Limited (ASX: NAB) provides banking, financial and related services. As on 5 November 2020, the market capitalisation of the bank stood at ~$61.52 billion. The bank has recently released its results for the full-year ended 30 September 2020, wherein it reported a fall of 1.4% in revenue, reflecting lower fee income given COVID-19 fee waivers and reduced transaction volumes. In the same time span, statutory net profit stood at $2,559 million and cash earnings went down by 36.6% to $3,710 million. During FY20, Net Interest Margin declined 1 basis point to 1.77%.

FY20 Financial Indicators (Source: Company Reports)

Healthy Balance Sheet: NAB reported a healthy balance sheet with decent provisions and an increase of 109bps in Group Common Equity Tier 1 (CET1) ratio to 11.47%. The bank has strengthened its provisioning coverage with CP/CRWA of 1.56% and CP/GLAs of 0.93% and funding and liquidity metrics well above the minimum thresholds. As at 30 September 2020, NAB’s leverage ratio stood at 5.8%.

Outlook: NAB is focused on simplifying processes and policies for home and business lending. It is also prioritizing to create a simpler transactional banking and is aiming to provide enhanced data and analytics to customers and colleagues and growing its digital bank. The bank is moving rapidly to implement its refreshed strategy and has a clear plan for discretionary investment spend program and specific commitments. The bank is anticipating a modest growth of 0-2% in its FY21 expenses and is targeting double-digit cash ROE in the next 3-5 years.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

P/BV Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendations: The bank retains healthy foundations for technology, leading to improved resilience, lower cost, and enhanced customer experience. It is focusing on growing its share in target segments, while managing risk and pricing disciplines. As per ASX, the stock of NAB is inclined towards its 52-weeks’ low of $13.195, proffering a decent opportunity for accumulation. The stock of NAB gave a return of 13.32% in the past three months and a return of 5.86% in the past one month. On a technical front, the stock of NAB has a support level of ~$17.323 and a resistance level of ~$20.542. We have valued the stock using the P/BV multiple and have arrived at a target price, offering an upside of low double-digit (in % terms). For the said purposes, we have considered Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Bank of Queensland Ltd (ASX: BOQ), etc., as peers. Considering the current trading levels, healthy balance sheet, and valuation, we recommend a ‘Buy’ rating on the stock at the current market price of $19.31, up by 3.262% on 5 November 2020, owing to its recent FY20 financial release.

NAB Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.