Why has the NAB share price had such a miserable week so far?

The National Australia Bank Ltd (ASX: NAB) share price has fallen by around 3.5% this week. That compares to the S&P/ASX 200 Index (ASX: XJO), which has gone up 1%. So, NAB has noticeably underperformed the market.

Share prices move all the time — and there could be an uptick for a number of ASX 200 shares today following a strong night on Wall Street.

But this week there was particularly important news for NAB – the big four bank released its FY22 result for the 12 months to September 2022.

Let’s have a look at some of the highlights.

FY22 result earnings recap

Statutory net profit after tax (NPAT) increased by 8.3% to $6.89 billion and cash earnings increased by 8.3% to $7.1 billion.

With the final dividend of 78 cents per share, this brought the annual dividend per share to $1.51 per share. The full-year dividend was increased by around 19%. At the current NAB share price, the FY22 grossed-up dividend yield is 7%.

However, the net interest margin (NIM) – the amount of money a bank makes on its lending – declined six basis points to 1.65%

Expenses increased by 5.8%, which is a sizeable increase. Excluding the impact of the Citi consumer business, expenses rose by 3.9%, with the biggest elements including higher remuneration and volume-related costs, higher technology and investment costs and increased financial crime and remediation spending, partly offset by productivity benefits.

Interestingly, the ratio of the number of loans that are over 90 days past due and impaired gross assets fell from 0.94% of total loans in FY21 to 0.66% in FY22.

It also said that housing lending competitive pressures are “likely to intensify” and that the NIM impact of RBA cash rate increases on unhedged deposits is expected to peak in the first half of FY23, while the estimated benefit of cash rate increases from October 2022 is “expected to be lower”.

Is the NAB share price an opportunity?

The broker Goldman Sachs is positive on NAB, according to reporting by my colleague James Mickleboro. It has a buy rating on the business, with a price target of $35.41. That implies a possible rise of around 14%.

Goldman Sachs reportedly said:

NAB’s cost management initiatives, which seem further progressed vs. peers, has allowed it to deliver the highest levels of productivity over the last three years, and we think this leaves it well positioned for an environment of elevated inflationary pressure (c. A$400 mn productivity savings expected in FY23).

However, Morgans currently rates it as a hold, with a price target of just $30.63. That suggests the NAB share price could remain flat over the next year. It lowered its expectations for the NIM leverage, though it’s still expected to rise and it’s also expecting higher costs. There could also be problems in the future with possible loan issues.

Citi is neutral on the business, with a price target of $32.75. That could be a possible rise of around 5%. A slowdown in business lending, where NAB is a key player, could also impact NAB’s future growth.

NAB share price snapshot

Despite the recent decline, the NAB share price has still risen by 5% since the beginning of the year.

The post Why has the NAB share price had such a miserable week so far? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Goldman Sachs tips major upside for the NAB share price
• ASX 200 bank shares: Buy, hold, or fold?
• 5 things to watch on the ASX 200 on Thursday
• Everything you need to know about the NAB dividend
• Why is the NAB share price sinking today?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/8OvMiCo