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NAB share price and dividend outlook: Q1 earnings preview

We examine some of the key things investors should know before the commercially inclined bank reports its quarterly results next week.

NAB share price and dividend outlook: Earnings preview Source: Bloomberg

When will the bank report its latest results?

The National Australia Bank (NAB) is set to report its latest round of quarterly results on 16 February, 2020.

While CBA recently reported their interim results and dividend, with NAB, ANZ and WBC all set to report quarterly results in February, it is unlikely investors will gain much further clarity on the remaining big four’s dividend outlook in the near-term.

On this front, analysts from Morgan Stanley said ‘We'd be surprised if any of the major banks provide dividend guidance at their 1Q21 trading updates.’

NAB share price rises, analysts remain upbeat

Despite COVID-19 causing significant uncertainty for Australia’s economic outlook, the NAB share price has performed strongly over the last six months, rising approximately 36% in that period.

On a more granular level, in the last 3-month period the stock has risen 17.28%, in the last 1-month period it has gained 6.48% and in the last 5-day period it has fallen close to 1%.

Despite that strong near-term performance, analysts continue to favour the stock, with NAB commanding and Overweight rating on average, according to the Wall Street Journal (WSJ). Of the 13 analysts covering the stock, 8 rate it a buy, 1 rate it Overweight, and 4 rate it a hold, also according to the WSJ.

Looking back at NAB’s most recent results, the bank reported significantly lower cash earnings and dividends for the full-year in FY20. Overall, NAB reported full-year statutory net profits of $2,559 million, cash earnings of $3,710 million, down 36.6% on a year-over-year basis, a 30 cents per share fully-franked final dividend, and reported a CET1 ratio of 11.47%.

Looking at some of the key fundamental expectations from one investment bank in particular, analysts from Morgan Stanley said they expected NAB to report the following quarterly (Q1) results:

  • Impairment charges of approximately $350 million
  • A CET1 ratio of approximately 11.5%
  • Revenue is expected to fall around 2.5%, while expenses are anticipated to rise about 1.5%
  • Cash earnings, when excluding notable items, are expected to come in at approximately $1.39 billion

What’s the current trend?

From a technical perspective, IG market analyst, Kyle Rodda recently wrote:

‘NAB shares have been relatively slower to recover compared to other members of the Big 4, mostly owing to the bank’s heavy exposure to business lending. Never the less, the share price’s trend is undoubtedly bullish, with momentum strong and trending upwards.’

Mr Rodda added that:

‘After breaking resistance at around $25.00 recently, the pre-pandemic highs for the stock come into view now at around $27.30.’

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