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NAB earnings preview: what to expect from its third quarter update

Investors will likely be keen to see how slowing global growth and record low interest rates have impacted NAB when it releases its Q3 trading results next Wednesday.

(ASX: NAB) share price earnings preview Source: Bloomberg

When is NAB’s results date?

The National Australia Bank Ltd will release its 2019 third quarter trading results on Wednesday, August 14.

What to expect from NAB’s Q3 update

The NAB share price has been on a tear since January, rising some 16% in that period.

Though NAB was hit hard by the fallout from the Royal Commission, the recent appointment of Ross McEwan as CEO and Managing Director seems to have reignited investor enthusiasm for the stock.

Announced on July 19, Philip Chronican, NAB's Chairman-elect, pointed out that Mr McEwan:

‘Brings a compelling range of experience across finance, insurance and investment with a track record of delivering important and practical improvements for customers. RBS has been through many of the same challenges which NAB now faces around culture, trust and reputation.’

Investors seemed to agree with this assessment, with NAB’s share price rising around 4% in the week following this announcement.

Mind you, Mr McEwan has yet to commence his role at NAB, as he wraps up his duties as CEO of the Royal Bank of Scotland.

NAB share price: growth remains uncertain

Though the National Australia Bank Ltd’s new CEO appointment may bode well for the bank, NAB and the big four banks in general, remain on shaky ground – as the global growth outlook weakens and historically low interest rates weigh on margins.

As a potential warning sign of lower profitability for the big four going forward, when the Commonwealth Bank of Australia reported its full-year results yesterday, investors bid CBA’s share price down, after the bank reported a sizable earnings miss and a flat dividend.

NAB, in its half-year results warned of similar concerns regarding the global growth outlook. Additionally, to the disappointment of investors, NAB also slashed its dividend in the first-half, arguing that the dividend levels at the time were ‘unsustainable’.

Even still, the bank currently commands a dividend yield of 6.59% and has not ruled out the potential of raising their dividend in the medium-term.

Comments on the outlook

Speaking of the future outlook, NAB cautioned that:

‘As we look ahead, the operating environment remains challenging. Economic growth is slowing.’

Here, the bank also pointed out:

‘This means we must execute with greater urgency, discipline and accountability, and with customers squarely at the centre of everything we do.'

Though the macro-environment looks subdued; analysts seem bullish on NAB’s ability to successful execute their overarching strategy. According to the Wall Street Journal, of the 14 analysts covering the bank, six rate it as a buy while only one rate it as a sell.

Overall, National Australia Bank Ltd has an overweight consensus rating ahead of its Q3 trading update, due out next week.

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