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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


National Australia Bank


National Australia Bank (NAB:ASX)

This big Aussie Bank could be a solid earner for any income  portfolio. National Australia Bank (NAB) is a large financial services group providing a comprehensive and integrated range of banking and financial services including a wealth management arm. NAB operates in Australia, New Zealand, parts of the United Kingdom and also has a small US exposure. The Australian franchise dominates and accounting for 80% of cash earnings and 60% of risk weighted assets. As the Australian economy looks likely to be one of the first to recover from the recent financial crisis, this all bodes well for NAB.
NAB has been very proactive during the recent market turmoil. There have been major changes in its top management in its three main geographic operating regions. This seems to be having a beneficial impact on the bank's corporate culture and is having a tangible impact on operating efficiency and associated ratios.

NAB has adapted its global expansion strategy in response to the the credit squeeze and the HomeSide debacle in the USA.  It has also divested its Irish bank holdings. It would seem that NAB is reverting to its more profitable core businesses, that have been very successful in the past.

Management is focused on restoring market share and earnings in the Australian, New Zealand and UK banking operations while expanding the domestic wealth management operations. Restructuring is focused on driving organic growth from existing franchises and acquisition growth is of secondary importance at present.

Considering the difficult economic conditions, NAB has turned in a decent performance - revenues from ordinary activities were $16.26bn up 4.7% from last year. The bank has enjoyed solid underlying profit growth of 13.9% which compares favourably to the September 2007 year. This  is the result of continued focus on growth in business and corporate lending while prudently  utilising capital, strong revenue growth in NABCapital Markets division, careful margin management and the achievement of further operational efficiencies.

CEO, John Stewart stated that he is confident NABs operations are well placed, with the appropriate focus on core businesses and the right financial settings to maintain strength and flexibility. 
National Bank of Australia (NAB) has just announced that it will axe its $30 overdrawn charge from all of its personal savings accounts and personal transaction accounts from October 1st 2009.
This is a clear sign to the other big Australian banks that it is making a bid to stay competitive in its home market and further grow its deposit taking business in Australia.

The shares pay an attractive 7.6% dividend yield, which is fully franked. In fact NAB increased its dividend payment this year. The full year dividend was 194 cents compared with 182 cents last year. The P/E (price/earnings) ratio is a very modest 10.6

Customer deposit inflows have continued to be strong during the first half of 2009. The June quarter unaudited cash earnings were approximately $0.9 billion. This is a solid performance in difficult recessionary times. The Bank's Tier 1 capital ratio will rise to around nine percent following its latest capital raising. This puts NAB in a strong position.

For those seeking a higher yielding investment and who are prepared to hold the shares longer term, NAB looks like a good buy at its current price aound $22.80

Buy (NAB:ASX) up to AU$25.00  


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.