NAB Share Price Breaths Sigh of Relief (ASX:NAB)

The National Australia Bank Ltd [ASX:NAB] share price is a little higher today thanks to unexpectedly strong Q3 results.

NAB is leading a rally in banks stocks, who are higher today except for Commonwealth Bank of Australia [ASX:CBA].

CBA announced its full-year results on Wednesday, which helped push its share price higher at the time.

Despite a fall in cash earnings and weaker margins, the NAB share price is trading 21 cents higher or 1.17% at time of writing to $18.22 per share.

What the NAB results tell us

In its Q3 2020 business update, NAB said cash earnings growth was down 7% on the previous corresponding quarter.

Totalling $1.55 billion.

However, when compared to the first half of 2020, cash earnings had increased by 24%.

Like CBA, the number of deferred loans had also fallen.

NAB said loans frozen by customers had fallen by 8% since 30 June.

Of the loans still deferred, 16% have elected to resume repayments.

What these results mean is NAB managed to build a strong balance sheet going into the COVID-19 crisis.

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Tellingly, the bank will not increase COVID-19 provisions of $807 million made in April.

Just as CBA did not increase theirs on Wednesday.

Unlike CBA, NAB’s balance sheet wasn’t supported purely by sound capital management.

NAB floundered through the first half of the year and announced a $3.5 billion capital raising in April to shore up its balance sheet.

In hindsight, the move has paid dividends (so to speak).

Its common equity tier 1 (CET1) capital ratio is 11.6%.

The highest it’s been over the past three years.

CET1 is designed to monitor banks’ capital adequacy.

What about my divided?

NAB did not mention dividends in its announcement today.

That news will likely come in November when we get full-year results.

NAB cut the first half dividend by 64% at its half-year results in April.

This was at a time when the bank took a 51% hit in net profit.

Though the outlook today is looking slightly more positive.

The bank’s net interest margin for the quarter came in flat but still slightly under the 1.79% it recorded in April.

Which is a decent result.

Meaning that a cut to the final dividend could still be on the cards.

But, like CBA, there is potential for it to be higher than predicted.

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Kind regards,

Lachlann Tierney

For The Rum Rebellion

 

 


Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 


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