NAB share price higher on stronger than expected Q1 update

A man holding a cup of coffee puts his thumb up and smiles while at laptop.

A man holding a cup of coffee puts his thumb up and smiles while at laptop.

The National Australia Bank Ltd (ASX: NAB) share price is clawing back some of Wednesday’s decline.

In morning trade, the banking giant’s shares are up 1% to $30.60.

Why is the NAB share price rising?

The NAB share price is rising today thanks to the release of the bank’s first quarter update.

For the three months ended 31 December, the big four bank reported a 15% increase in revenue and an 18.7% jump in cash earnings to $2.15 billion.

This was driven by higher net interest margins (NIM), stronger Markets & Treasury income, and volume growth, partly offset by home lending competition.

In respect to NAB’s NIM, it improved by 12 basis points to 1.79% due to the benefits of the rising interest rate environment.

Broker reaction

Brokers have responded positively to NAB’s update. For example, Goldman Sachs highlights that this update implies that the bank is run-rating 3% ahead of its first half estimates. It commented:

NAB has released its 1Q23 trading update, with unaudited cash earnings from continuing operations of A$2.15 bn, up 18% on the previous period average, run-rating 3% above what is implied by our current 1H23E forecasts. The better than expected performance was driven by stronger revenues (Markets) and lower BDDs, partially offset by higher expenses. PPOP was up 23% on the previous period average, and also 3% ahead of GSe. NAB’s CET1 ratio of 11.3% was running in-line with our implied 1H23E forecasts.

The broker also suspects that the result could ease concerns about its margins following the update from Commonwealth Bank of Australia (ASX: CBA) yesterday. That update appeared to indicate that CBA’s NIM had peaked a year earlier than expected. Goldman doesn’t believe this is the case for NAB. It said:

We see NAB’s 1Q23 operating performance as a positive, particularly given the commentary CBA made at its 1H23 result, which suggested NIMs have peaked. While detailed commentary is not included in today’s update, NAB’s 1Q23 operating trends seem consistent with management commentary at its FY22 result (here), particularly it relates to NIMs. We note we currently forecast NAB’s NIM to rise 15 bp hoh in 1H23E, 4 bp in 2H23E, before beginning a steady path downwards.

Goldman has a buy rating and $35.60 price target on NAB’s shares.

The post NAB share price higher on stronger than expected Q1 update appeared first on The Motley Fool Australia.

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