National Australia Bank Limited

NAB Details

Investigation Initiated Against Anti-Money Laundering: National Australia Bank Limited (ASX: NAB) is involved in banking services, international banking, investment banking, wealth management services, trustee, and nominee service. Its segments include Business and Private Banking, Consumer Banking and Wealth, Corporate and Institutional Banking and New Zealand Banking. NAB has been informed by AUSTRAC (Australian Transaction Reports and Analysis Centre) regarding issues with NAB’s compliance with the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Act 2006 on 7 June 2021. AUSTRAC is of the view that NAB is failed to comply with customer identification procedures. However, AUSTRAC has not made any final decision on taking any enforcement decision. However, NAB is expected to assist AUSTRAC in carrying out investigations against the ongoing issue. 

1HFY21 Financial Highlights: NAB has registered a decline in net interest income to $6,840mn in 1HFY21 against $6,888mn in 1HFY20. NAB has seen a significant rise in its profit to $3,210mn in 1HFY21 against $1,315mn in 1HFY20 on the back of lower operating expenses. The company has seen a decline in its cash balance to $52,831mn as on 31 March 2021 against $58,338mn as on 31 March 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company requires regulatory approvals for the smooth functioning of its business. Therefore, any delay in regulatory approvals may impact the business of the company. In addition, the company is into banking systems. Therefore, any severe change in interest rates may impact the financials of the company. 

Outlook: NAB is looking to develop a digital banking system in the future and increase its customer base. For this purpose, NAB has acquired UBank’s brand “86 400” and combined UBank’s customer base in January 2021. 

Valuation Methodology: Price/Book Value based Relative Valuation Method (Illustrative)

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of NAB gave a return of 51.27% in the last nine months. The current market capitalisation of NAB stands at ~$90.74bn as of 7 June 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$16.56~$27.84. On the technical analysis front, the stock has a support level of ~$24.442 and a resistance of ~$27.498. We have valued the stock using the P/BV multiple-based illustrative relative valuation method and arrived at a target price with a high single digit-upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering a decline in net interest income in 1HFY21, ongoing investigation for anti-money laundering and a decline in cash balance as on 31 March 2021. For this purpose, we have taken peers Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA). Considering the bank has registered a significant rise in profits in 1HFY21, decline in operating expenses in 1HFY21, decent outlook and valuation, we recommend a “Hold” rating on the stock at the current market price of $26.64, down by ~3.163% as on 7 June 2021.

NAB Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.