The National Australia Bank Ltd (ASX: NAB) share price has started the day in the red.
The banking giant's shares were down as much as 3.5% to $31.24 in early trade.
The NAB share price has since recovered a touch but remains down 1.5% to $31.98 at the time of writing.
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Why is the NAB share price falling?
Investors have been selling down the NAB share price today after the banking giant's half-year results disappointed the market.
For the six months ended 31 March, NAB reported a 4.6% increase in revenue to $9,071 million and a 4.1% lift in cash earnings to $3,480 million.
A note out of Goldman Sachs highlights that this was short of expectations. The broker said:
NAB reported 1H22 cash earnings (company basis) from continued operations of A$3,480 mn, which was up 4% on pcp and 2% below GSe, driven by lower-than-expected Trading non-interest income and higher operating expenses. As such, 2H21 PPOP missed GSe by -3%. However, on an ex-Trading income basis, PPOP was 3% better than GSe.
Costs outlook disappoints
While the earnings miss was disappointing, the main weakness in the NAB share price may have been driven by its costs outlook.
NAB has followed the lead of Australia and New Zealand Banking Group Ltd (ASX: ANZ) by abandoning its cost base targets. Goldman highlights:
Looking forward, NAB highlighted: i) No longer targeting cost ambition of $7.7bn by FY23-25, ii) Investment spend expected to be c.$1.4bn p.a. from FY22 (previously broadly flat on FY21 A$1,259mn), and iii) FY22 opex expected to increase by c.2-3% reflecting a) Growth opportunities, and b) Cost headwinds including inflation and costs to deliver activities required under AUSTRAC's Enforceable Undertaking (EU) – Estimated costs of A$80-120 mn p.a. in FY22, FY23 and FY24 to deliver the EU (here) requirements.
Are NAB's shares in the buy zone?
As things stand, Goldman Sachs has a conviction buy rating and $34.03 price target on NAB's shares.
However, this recommendation could change once the broker has updated its financial model. Which is exactly what happened with Goldman's rating on ANZ's shares this morning, as you can read here.
