Later this week all eyes will be on the National Australia Bank Ltd (ASX: NAB) share price when the banking giant releases its half-year results.
Ahead of the release on Thursday 5 May, let's take a look to see what the market is expecting from NAB.
What is the market expecting from NAB's half year results?
According to a note out of Goldman Sachs, its analysts expect NAB to report first half cash earnings before one-offs of $3,545 million. This will be a 6% increase on the prior corresponding period.
The broker expects this to allow the NAB board to declare a fully franked interim dividend of 72 cents per share, which will be a sizeable 20% increase on the same period last year.
What else should you look out for?
One key area of focus will be NAB's margins. Goldman is forecasting further weakness in the bank's net interest margin (NIM) to 1.61%. It explained:
"At the 1Q22 trading update NIMs declined 5 bp to 1.64% and we note this included a modest negative impact from Markets and Treasury as well as higher liquids. Excluding these impacts, NIM declined 2 bp due to i) competitive pressures and ii) housing lending mix, partly offset by iii) lower funding and deposit costs. We remind investors that NAB at its FY21 result noted that while a flat FY22E NIM would be difficult to achieve, it did not expect it to be unusually weak.
Accordingly, we forecast 1H22E NIM of 1.61% which is down 8bp vs. 2H21 and will be keen to get an update on NAB's leverage to higher cash rates."
Another area of interest will be NAB's expenses, which the broker expects to be well-contained.
"NAB's 1Q22 expenses increased 2% and was driven by: i) mainly higher salaries and leave costs, combined with ii) investment to support growth, partly offset by iii) productivity benefits. Despite this, NAB reiterated it would continue to target broadly flat expenses in FY22, and we remind investors at its FY21, NAB also highlighted FY22 investment spend expected to be broadly flat and will overall continue to target FY23-25 costs to be lower than $7.7bn.
We are forecasting 1H22E expense growth of +1.5% pcp and will be interested to get an update on how NAB's cost management initiatives have played out since the FY21 results, as well has how its investment spend mix has changed (NAB targeting 50% on growth and customer experience by FY22 vs 39% in FY21)."
Are NAB shares good value?
The team at Goldman Sachs still see a bit of value in NAB shares at the current level.
This morning the broker retained its conviction buy rating and $34.03 price target on the bank's shares.
Including dividends, this implies a total potential return of approximately 9% for investors over the next 12 months.
