Why is NAB’s stock price falling today?


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The National Australia Bank Ltd (ASX:NAB) The stock price came under pressure on Wednesday.

In morning trading, shares of the banking giant are down 3% at $31.02.

Why is NAB’s stock price falling?

Investors sold NAB’s share price this morning after the bank’s annual results disappointed the market.

According to the release, for the 12 months ended Sept. 30, NAB reported cash profit growth of 8.3% to $7,104 million.

This development is largely explained by the strong profit growth of its Business & Private Banking and Corporate & Institutional Banking activities, which compensated for a decline in the profits of the Personal Banking activity.

NAB’s board declared a final fully franked dividend of 78 cents per share, bringing the bank’s annual dividend to 151 cents per share. This represents an 18.9% year-over-year increase.

What was the reaction?

Goldman Sachs analysts were a bit disappointed with the result, which may explain some of the weakness in NAB stock price today. He commented:

NAB reported FY22 (company basis) cash profit from continuing operations of A$7,104 million, up 8.3% from pcp and -1.5% below GSe , thanks to higher than expected BDDs.

NAB’s 2H22 NIM was up 4bps to 1.67% (up 8bps to 1.71% excluding market and cash impacts), 2bps below our expectations (GSe 1.69 %) and we note that NAB’s 4Q22 MNI was 1.72% (up 10bp on 3Q).

Goldman also points out that NAB has highlighted some headwinds the company faces in fiscal 2023. He explained:

Looking ahead, NAB highlighted additional headwinds in FY23, noting: i) higher inflationary pressure on vendor wages and costs, ii) higher depreciation and amortization of C$140 million, iii) targeted productivity savings of C$400 million, iv) an overall cost to revenue ratio is expected to decline, and v) capital expenditure is expected to be 1.5 billion Canadian dollars.

The broker also notes that NAB stated that “competitive pressures from home loans [are] likely to intensify” and the “headwind of the deposit mix [is] acceleration, further increase in financing costs.

Should I buy the dip?

Goldman has a buy rating and price target of $34.81 on the company’s stock. Based on the current NAB share price, this implies an upside potential of 12%.

However, it is worth remembering that the broker might change its recommendation and price target once it adjusts its financial model to reflect today’s result.


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