NAB share price: Q3 trading update unpacked

We look at the highlights from the National Australia Bank’s third quarter trading update, as well as one top investment bank’s reaction to these results.

The National Australia Bank (NAB) saw its share price spike close to 2% in the first thirty minutes of trade after the bank released its third quarter trading update to the market.

Here NAB reported stable net interest margins, lower cash earnings on a year-over-year basis, and reported a common equity tier ratio of 11.6%.

Mind you, while the bank’s share price spiked in response to this market update, NAB’s market capitalisation has fallen by over 30% in the last year – as investors abandon a sector that has come to be dominated by uncertainty.

Indeed, underscoring these challenges, NAB’s CEO, Ross Mcewan, noted that today's Q3 results are 'reflective of the current operating environment, characterised by volatile markets, subdued credit demand, low interest rates, cost pressures and deteriorating asset quality. In navigating these near-term challenges, we have not lost sight of the need to invest for NAB's long term future.'

Q3 trading update unpacked

Looking at some of the key operational highlights from NAB's third quarter trading update, the bank reported unaudited statutory net profits of $1.50 billion and unaudited cash earnings of $1.55 billion – implying a year-over-year decline of 7%.

By a different measure – when compared to the H1 quarterly average and excluding a number of significant items – the bank noted that cash earnings increased by an impressive 24%, revenue rose by 10% and expenses increased 2%, driven by Covid-19 related staffing considerations.

Impressively, in spite of historically low interest rates, the bank reported stable net interest margins (NIMs), noting that low interest rates and competitive pressure were 'offset by lower short-term wholesale funding costs.'

Want to trade bank stocks, long or short?

Create an IG trading account, a demo account or log in to your existing account to get started now.

Credit quality under the microscope

Looking at how the coronavirus pandemic has impacted NAB's customers, the bank reported that by the end of the June quarter it had recognised some 86 thousand home loan deferrals and 38 thousand business loan deferrals – totalling $55 billion.

'Our repayment deferrals are providing vital assistance to customers, in combination with significant relief from governments and regulators,’ the bank said.

In line with the above, NAB also reported that its credit impairment charges remain elevated – coming in at $570 million in the June quarter, though down from the $976 million recorded in the prior quarter.

As per APRA’s recent regulatory guidance, for customers who have deferred their loan repayments, these loans have been deemed ‘performing’.

As the regulator noted in April, when an authorised deposit taking institution ‘restructures an affected borrower’s facilities before 31 March 2021 with a view to putting the borrower on a sustainable financial footing, the loan may continue to be regarded as a performing loan for capital and regulatory reporting purposes.’

NAB share price, the analyst view

In response to the Q3, Macquarie Wealth Management analysts were underwhelmed, reiterating their Underperform rating and $17.50 price target.

Here the investment bank argued that:

‘While we expect the market to see NAB’s 3Q20 trends positively and are supportive of NAB’s long-term thesis, we remain concerned with the risks stemming from deteriorating credit quality that is likely to impact NAB’s performance in FY21a.’

How to trade the banks, long or short

With both CBA and NBA now having reported their full-year and Q3 results, respectively – where do you stand on the banks, are you bullish or bearish? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) NAB using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘NAB’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.