National Bank’s result slightly beat the broker and sizeably beat consensus. The bank’s revenue trajectory outpaced peers, the broker notes, due to a shift in momentum in housing and business lending.
The weak market response was due to an update on asset quality. While overall improvement was seen, leading to lowered provisions against bad debts and increased capital, growing “tail risk” is evident in increasing loans in arrears.
Given the risk suggests limited upside, the broker retains Neutral and a $26.25 target.
Target price is $26.25.Current Price is $26.56. Difference: ($0.31) – (brackets indicate current price is over target). If NAB meets the Citi target it will return approximately -1% (excluding dividends, fees and charges – negative figures indicate an expected loss).