NAB earnings preview: 3 things to consider ahead of FY19 results

When will NAB release its FY19 results?

The National Australia Bank (ASX: NAB) is set to release its full-year results to the market tomorrow, Thursday, November 7.

What is the current analyst outlook?

Historically low interest rates, uncertainty regarding New Zealand’s soon-to-be finalised capital requirements and the continued impact of the Hayne Royal commission have all had significant impact on the business models of some of Australia’s most important financial institutions.

Westpac just this Monday slashed their final dividend by 15%. ANZ, though maintaining their dividend at 80 cents per share, reduced their franking rate from 100% to 70%.

Yet even under this industry-wide pressure, the National Australia Bank (ASX: NAB) remains well liked by analysts. According to the Wall Street Journal (WSJ), the analyst outlook for NAB is an upbeat one: with an overweight consensus rating. This comes even as NAB flagged some $1.18bn in remediation and software capitalisation costs, set to be realised in the second-half of FY19.

Commenting specifically on these charges, the bank previously noted that these costs are:

‘Expected to reduce 2H19 cash earnings by an estimated $1,123 million after tax and earnings from discontinued operations by an estimated $57 million after tax.’

Even so, according to the WSJ, of the 14 analysts currently covering NAB, a significant six of them rate the stock a buy, one analyst is overweight the bank, five have a hold rating on NAB and only two think the stock is a sell.

Morgan Stanley, who accurately predicted that Westpac would cut their dividend by 15% as part of their full-year results – and as we previously wrote – is also of the opinion that ‘the NAB dividend will remain flat, [though] a capital build overtime’ looks likely.

Morgan Stanley, for reference, has an underweight rating and a share price target of $25.60 on NAB.

NAB share price powers forward

Regardless of the broader challenges Australia’s financial sector has encountered, the NAB share price has been the best performing of the big four, rising approximately 17% YTD.

The share prices of the remaining three of the big four have struggled, by comparison. Since January, for example, CBA has risen 10%, ANZ has gained just 9% and the Westpac share price has climbed 11%.

Mind you, even though NAB has outperformed its Australian banking peers – it has underperformed the broader market – with the ASX 200 rising an impressive 20% in the last ten-and-a-bit months.

The NAB share price is currently down 0.36% to $27.76 per share ahead of tomorrow’s FY19 results.

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