The National Australia Bank Ltd (ASX: NAB) share price hasn't moved much over the last month. But is it an opportunity today?
NAB's shares have dropped 1.7% over the last month. However, it has gone up 13% over the last six months to the current price of $26.63.
It has come a long way from the approximate low of around $15 of the bottom of the COVID-19 crash.
How has NAB been tracking recently?
The latest insight that investors have seen into the performance of the business was the half-year result that was released a month ago.
It generated $3.21 billion of statutory net profit. NAB generated $3.34 billion of cash earnings, which was an increase of 94.8% compared to the first half of FY20. There was an increase of cash earnings of 35.1% compared to the first half of FY20, excluding large notable items.
NAB's balance sheet continues to improve. Its group common equity tier 1 (CET1) ratio of 12.37% was up 90 basis points from September 2020. The pro forma CET1 ratio was 12.75%, reflecting the estimated impacts from the agreed sale of MLC Wealth and BNZ Life, less the acquisition of 86 400.
The personal banking division saw 14.1% growth of cash earnings to $859 million, benefiting from reduced credit impairment charges, home loan repricing and lower funding costs.
Corporate and institutional banking saw a 15.7% increase in profit to $782 million. Earnings increased with improved outcomes across most key drivers.
The New Zealand banking division saw a 9.65% increase of cash earnings to NZ$616 million. It saw higher earnings with revenue increasing due to growth in lending and improved margins, combined with reduced credit impairment charges.
However, the business and private segment suffered a 10.3% drop in cash earnings to $1.22 billion. This reflected lower revenue mostly due to the low interest rate environment, and higher operating expenses.
NAB remains cautious about the outlook. It said at the time of the result release, that the economic outlook had improved, but the sustainability of the recovery remains uncertain at this stage and customer impacts are uneven. To reflect that, the collective provision remains "prudent" at 1.50% of credit risk weighted assets.
AUSTRAC problems
A few days ago, NAB announced that it had been informed by AUSTRAC that it has identified serious concerns with NAB's compliance with the anti-money laundering (AML) and counter-terrorism financing (CTF) laws.
AUSTRAC advised in a letter at the start of June 2021, that it is AUSTRAC's view that there is "potential serious and ongoing non-compliance" with customer identification procedures, ongoing customer due diligence and compliance.
However, in the letter, AUSTRAC stated that it has not yet made a decision about whether or not enforcement action would be taken. AUSTRAC also said, at this stage, it is not considering civil penalty proceedings and that this decision is "reflective of the work undertaken" by NAB to date.
Is the NAB share price an opportunity right now?
Most brokers think that NAB shares are now a hold, such as Morgans. It has a price target on NAB of $27.50. The broker thinks the looming AUSTRAC investigation will impact the NAB share price.
The broker Citi has a price target on NAB of $26.20, it has also highlighted the AUSTRAC investigation, though it doesn't think it will lead to any actual penalties.
According to Citi, NAB shares are valued at around 14x FY21's estimated earnings.
