National Australia Bank (NAB) Share Update

Submitted by Share Trading on 8 February, 2008 - 11:52

An update from Australian stock analyst Macquarie Research Equities (MRE) about National Australia Bank's (NAB) Annual General Meeting (AGM).

Yesterday at NAB’s AGM, CEO John Stewart reinforced that that the company was on track to meet profit guidance at the upcoming result. After initially getting sold down on the back of a large sell down in the banking sector, this news provided welcome relief for NAB share holders, resulting in the stock outperforming the sector. Chairman Michael Chaney also reaffirmed the underlying strength of NAB’s balance sheet.

The reaffirmation of strong revenue growth in selected markets by NAB perhaps bodes well for a sector that has experienced a marked correction in recent months. Medium term forecast, as indicated by MRE, indicate that the bank will continue to target a dividend payout ratio of 65% and also expects franking in the range of 80% to 100% given NAB’s business portfolio.

The Chairman also projected his view that NAB maintains strong funding capability despite funding and wholesale cost pressure. The firm has acknowledged that margins have been impacted by higher wholesale funding costs and will look to announce any interest rate adjustments in the next couple of days. With the RBA raising interest rates recently, the market witnessed an excessive rise by CBA of 30 bps to maintain book margins and ensure the company remains well positioned in light of domestic pressure. MRE are of the view that NAB is also likely to increase its variable mortgage rate by more than the official rate rise.

In summary, the AGM reaffirmated statements by the NAB Chair and CEO regarding revenue growth and the management of market and cost pressure is quite encouraging. As the battered US banks and UK banks continue to struggle in the face of sub-prime woes, the announcements from the NAB meeting was yet another recitation of Australian banking resilience.