Should I buy NAB shares ahead of next week’s half-year results?

A middle-aged woman sits in contemplation over a tablet device considering information about ASX shares and deep in thought.A middle-aged woman sits in contemplation over a tablet device considering information about ASX shares and deep in thought.

The National Australia Bank Ltd (ASX: NAB) share price has shed nearly 5% in the year to date but is now the time to buy?

NAB shares closed 0.38% in Thursday’s trade at $28.73 apiece. For perspective, the S&P/ASX 200 (ASX: XJO) closed 0.32% lower.

Let’s take a look at the outlook for the NAB share price.

What’s ahead?

NAB is due to deliver half-year financial results to the market on Thursday next week. The company’s interim dividend is also expected to be announced.

Analysts at Goldman Sachs are positive on NAB’s outlook. The broker has a “buy” rating on NAB shares with a $35.42 price target.

The team at Goldman likes NAB’s exposure to commercial lending and forecasts “volume momentum over the next 12 months as favouring commercial volumes over housing volumes”.

Goldman is tipping NAB to pay a total of $1.68 in dividends in the 2023 financial year. If this forecast is delivered, it would be a higher dividend than shareholders received last financial year.

NAB paid a fully franked interim dividend of 73 cents per share last year, followed by a 78 cents per share fully franked final dividend in November. This was a total of $1.51 in dividends per share for the year.

However, the team at Morgans has recently cut its price target on NAB to $28.78 with one reason being “slowing loan growth”. The broker said:

Recent slowing of loan growth. Leading SME [small to medium enterprise] relationship banking franchise. Increased simplification and improving digitisation in personal banking.

Meaningful improvement in ROE that is in excess of cost of equity. Attractive yield and buyback. Cautious re step-up in costs and weaker valuation support.

Meanwhile, the Reserve Bank of Australia is also due to meet next Tuesday to decide the official cash rate. Banks tend to take the lead from the RBA when it comes to lifting interest rates on customer loans.

However, inflation data yesterday came out lower than expected at 6.6% year on year. City Index senior market analyst Matt Simpson believes the RBA is on track to keep the official cash rate on pause at next week’s meeting. He said:

Trimmed mean inflation year on year (the RBA’s preferred inflation measure) snapped a seven quarter rise, and it backs up the hopes that inflation has indeed topped in Australia. The quarterly measure also moved lower for a second consecutive quarter, at its fastest pace since the pandemic.

And as the trajectory from Q4 2022 to Q1 2022 more than keeps them on track for their Q2 target, I suspect the RBA will be content in keeping rates on hold at next week’s meeting, especially as “inflation expectations remain well anchored”.  However, that is not to say the RBA have reached their terminal rate in the cycle, as disinflation needs to keep up the pact to justify a pause in the coming months.

ANZ research analysts are also tipping the RBA to maintain the cash rate at 3.6% at the May meeting, according to a research note this morning.

Share price snapshot

National Australia Bank shares have fallen 11% in the last year but they have climbed 5.43% in the last month.

NAB has a market capitalisation of about $89.9 billion based on the current share price.

The post Should I buy NAB shares ahead of next week’s half-year results? appeared first on The Motley Fool Australia.

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