NATIONAL AUSTRALIA BANK LIMITED (ASX:NAB) shares touched a fresh record $47.96 in early trade after the lender delivered a strong quarterly profit, supported by growth across its home and business lending divisions.
After the initial jump, NAB was trading around $47.75, up about 5%.
Markets and treasury boost revenue; bad debts fall
NAB reported a 16% lift in cash earnings to $2 billion. Analysts said much of the upside reflected stronger markets and treasury performance alongside lower bad debts.
In a note to clients, Citi analyst Thomas Strong pointed to revenue of $5.6 billion, which he said was around 6% ahead of Citi’s estimates.
NAB’s total revenue was 6% higher than the average of the second half of last year, with underlying revenue up 4%. Strong said this suggests markets and treasury revenue was around 30% higher over the same period.
Bad debts fell to $170 million, also beating Citi’s expectation of $249 million.
“Excluding the M&T beat and the bad debts, we estimate that the result is a around 4-5% beat vs consensus (net profit after tax) expectations,” Strong said.
However, he flagged NAB’s CET1 ratio of 11.48% as a “clear negative” from the release.
“While we expect the market to positively receive the result, we note that a) the market will somewhat look through the M&T beat; and b) the shares have outperformed in the lead-up to this result… capturing some of the upside from today’s beat,” Strong said.