NAB

Analyst UBS has given an Australian banking sector update, and the influence of the deterioration in the US mortgage market and its implications for Australia. The analyst remains overweight on the Australian banking sector with ANZ, CBA and WBC having a Buy 1 broker call. Recent weeks have seen significant pressure on the US financial system driven by weakness in the mortgage market.

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 (NAB) have a Neutral 1 share trading recommendation and a share price target of $42 from analyst UBS. NAB has announced that it has extended its current buy-back program by a further $700m. This takes its total capital management program to $1.5b since the FY06 result in November. The buy-back period has also been extended to 30 Sep 2007. UBS view NAB's active capital management policy as a positive, it has minimal financial benefit to the Group. Given NAB's high PE ratio (13.8x 2008E) and the higher interest rate environment, lost free float almost offsets the benefit from reduced share count. As a result the analyst have increased 2008E EPS by just 0.4% post this announcement. 2008 ROE also increases slightly to 18.7% (from 18.3%). NAB's capital position remains strong with $1.6b in excess Tier 1 post current initiatives. This could be used for further buy-backs or "bolt on" acquisitions. The analysts think acquisitions would be accretive to NAB given its healthy PE (esp vs UK). NAB continues to investigate a NOHC structure. Key drivers for the NAB identified by the analyst are: (1) Earnings momentum now +ve, turnaround well 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 (NAB) have had a Buy stock recommendation reinstated from Hold with a $42 share price target (from $38) from stock analyst Citigroup Investment Research (CIR). CIR note that NAB is their preferred bank after ANZ's 10 percent share price rise in the past month. The stock analyst gives ten reasons why they love NAD so much:

Macquarie Research Equities (MRE) have highlighted some superannuation stocks that will be advantaged from increased capital inflows from the strong super inflows during this year as well as a consequence over the proposed changes to superannuation regulations announced in the 2006 Budget made superannuation.

Macquarie Research Equities (MRE) note that ""

With investors increasingly risk averse, share prices are at risk in this reporting season if profit delivery does not match the market’s expectations. This change in investor risk appetite driven by concerns over the outlook for global growth and the continued increase in cash rates around the world (ECB and Bank of England the most recent) is impacting on market valuations.

JP Morgan have rated the National Australia Bank (NAB) stock as Underweight. National Australia Bank Limited is listed on the Australian Stock Exchange (ASX) under stock code NAB. You can view their investor website here. The company's principal activities are in the provision of banking, financial and related services. View other posts about NAB. Check your charts!

Macquarie Research Equities (MRE) have reviewed the recent bank sector performance after the end of the recent banking reporting season. Within the banking sector, MRE continues to prefer ANZ (12 month share price target of $28.75) and CBA (12 month share price target of $47.60) given solid revenue growth and the capacity to look to cost opportunities should conditions slow (rather than reverting to cost management just to deliver competitive growth in the current strong environment).

Macquarie Research Equities’ (MRE) has reiterated their Neutral recommendation for the NAB. forecast and 1% above market expectations. MRE believes that the NAB does not deserve to trade at a premium to its peers. National Australia Bank is listed on the Australian Stock Exchange (ASX) under stock code NAB. Check your charts!

Last week the Australian government handed down their 2006-07 federal budget. Macquarie Research Equities (MRE) notes that "The centre piece of the Budget was the personal income tax cuts which were more widespread and extensive than the financial markets had been anticipating. This will inevitably provoke fears that interest rates may have to rise in order to offset the fiscal stimulus.
The key initiatives announced in the Budget that have notable implications for the Australian listed market are as follows:
- Reductions in the tax rates on personal income as well as increases to the thresholds for each tax rate;
- Accelerating the depreciation allowance for eligible business investment;
- Abolition of the Reasonable Benefit Limit (RBL) and age based contribution limits, and the elimination of tax of benefits paid to retires from taxed superannuation funds."
Here are some Australian listed stocks that MRE believes that will benefit from the budget: