Why has the NAB share price dipped today?

Posted: 9 November 2021 12:46 pm

Following strong rises of nearly 50% in the last 12 months, NAB is seeing a pullback today.

Shares in National Australia Bank (ASX: NAB) are among the most traded shares on the ASX. However the stock, which has steadily risen through the last year, was among the worst performers on Tuesday, down 2.5% to $28.37 at the time of writing.

What is weighing on the NAB stock price?

NAB, Australia’s third largest lender, on Tuesday reported a rebound in full year profitability. Cash earnings for the year to 30 September jumped 77% to $6.56 billion and the bank more than doubled its final dividend from last year to 67 cents per share.

The lender lifted its overall loans and advances by 5.9%, largely due to a stronger than expected performance in the home loans market. That helped show a 14.4% increase in its personal banking income while the New Zealand banking unit also enjoyed an 18.7% rise.

However, investors seem to be more worried about the fact that performance in NAB’s biggest division, business banking, was lacklustre, recording only a 0.3% improvement in earnings. Even this came about due to lower impairment charges, but operating expenses at the unit were higher.

Institutional banking income also slid 14.8%, with the net effect that its net interest margin ended 6 basis points lower to 1.71%. The overall profit itself was slightly inflated by a $217 million reversal in COVID-related provisions because loan losses were lower than expected.

Uncertain outlook

Meanwhile, analysts are noting NAB’s commentary around prospects in the coming months.

NAB CEO Ross McEwan on Tuesday said the competition in the home loans market has intensified during the second half of the year, meaning there is a cloud on continued growth in that segment.

The bank also expects net interest margin to remain subdued in FY 2022 because of the low interest rate environment, before turning positive in FY 2023. Australia’s major banks are expecting an impact as cheap funding from the Reserve Bank that was made available during the pandemic is gradually pared back.

NAB also expects the economic recovery in Australia will be postponed until 2022. It is forecasting a 3.8% hit to the economy for the September quarter, when major states were in lockdown, before GDP rebounds by 4% in 2022.

"While some uncertainties exist in the outlook including the impact of tapering support, our balance sheet settings are strong and we are well positioned for the expected economic rebound,” Mr McEwan said in a statement to the ASX.

NAB shares are up nearly 50% over the past 12 months.

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