Is the NAB (ASX:NAB) share price good value ahead of earnings season?

Are this banking giant’s shares good value?

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The National Australia Bank Ltd (ASX: NAB) share price has been a positive performer in 2021.

Since the start of the year, the banking giant’s shares have risen 12%. This means the NAB share price is now up 42% over the last 12 months.

In light of this strong form, expectations are high for its third quarter update next month.

What is expected from NAB?

According to a note out of Bell Potter, its analysts have revealed what they are expecting from the banking giant next month.

The broker has revealed that its expects NAB to report third quarter statutory earnings of ~$1.59 billion and cash earnings of ~$1.60 billion. This compares to statutory earnings of $1.50 billion and cash earnings of $1.55 billion in the prior corresponding period.

The broker expects this to be driven by flat net interest income, higher other banking income, and lower operating expenses.

It commented: “3Q21 should again mirror 1H21 numbers on an average basis. This is given flat net interest income ($3.42bn both ways), higher other banking income ($842m vs. $800m previously) and lower operating expenses ($1.90bn, slightly down from $1.93bn). On the other hand, credit impairment charges were slightly higher based on normalisation of events ($106m charge vs. $64m benefit).”

Bell Potter is also expecting NAB’s CET1 ratio to improve year on year. It has pencilled in a CET1 ratio of 12.5%, up from 11.6% a year earlier and 12.4% at the end of the first half.

This is expected to be driven by ongoing strong cash earnings and slight benefits from RWA movements (asset quality and operational risk) and rates and foreign exchange movements.

Is the NAB share price in the buy zone?

Bell Potter doesn’t see enough value in the NAB share price at this point to maintain its buy rating.

In light of this, its analysts have downgraded its shares to a hold rating with an improved price target of $27.50. This compares to the latest NAB share price of $25.77.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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