National Australia Bank (NAB) Share Trading Recommendation

Submitted by Craig Strzelecki on 9 February, 2007 - 21:59

National Australia Bank (NAB) has a Neutral 1 share trading recommendation and a $42 price target from analyst UBS. Today NAB updated the market on the progress & strategy of nabCapital (formerly called IMS). Key points: (1) Business turnaround now largely done (2) Strategy to "Originate, Warehouse, Distribute" to improve ROE (3) optimising portfolio held on balance sheet (4) working with other divs as an integrated business. The analystwas disappointed by the lack of financial data in the briefing, which was long on motherhood statements. Management did not answer any financial q's on upside from the "OWD" model, financial targets or ROE potential. nabCapital surprised in the speed of recovery since 2004. Despite the asset run-off (RWA down $23b) nabCapital grew NPAT by 7% last year. RoRWA is up from 71bp to 114bp (2H06). However, 2006 NPAT was boosted by provision write-backs (c.$60m NPAT) & large Structured Finance deals. Normalising may hold back NPAT in 2007. nabCapital growth could be weaker than the Group going forward. The analyst has noted down the following drivers for the NAB share price: (1) Earnings momentum now +ve, turnaround on track (2) capital flexibility (3) UK & cost upside (4) potential accretive acquisitions. Risks: (1) BDD trend higher than peers, esp in UK (2) execution risk (3) Underlying trends unclear given extensive use of BS provisions.

National Australia Bank Limited is listed on the Australian Stock Exchange (ASX) under stock code NAB. You can view their investor website here. NAB was listed on the ASX on 1 January, 1974. John Stewart is the CEO of NAB and the Chairman is Michael Chaney. National Australia Bank provides banking, financial and related services. The Group are an international financial services organisation that provides a comprehensive and integrated range of financial products and services through our group of banks. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade NAB. Check your charts and good luck with your share trading!