The National Australia Bank Ltd (ASX: NAB) share price has come under pressure on Wednesday.
In morning trade, the banking giant's shares are down 3% to $31.02.
Why is the NAB share price falling?
Investors have been selling down the NAB share price this morning after the bank's full year results disappointed the market.
According to the release, for the 12 months ended 30 September, NAB reported cash earnings growth of 8.3% to $7,104 million.
This was driven largely by strong earnings growth from its Business & Private Banking and Corporate & Institutional Banking businesses, which offset an earnings decline from the Personal Banking business.
NAB's board declared a fully franked final dividend of 78 cents per share, which brought the bank's full year dividend to 151 cents per share. This represents an increase of 18.9% year over year.
What has the reaction been?
Analysts at Goldman Sachs were a little underwhelmed with the result, which may explain some of the weakness in the NAB share price today. It commented:
NAB reported FY22 cash earnings (company basis) from continued operations of A$7,104 mn, which was up 8.3% on pcp and -1.5% below GSe, driven by higher-than-expected BDDs.
NAB's 2H22 NIM was up 4 bp hoh to 1.67% (up 8 bp to 1.71% ex Markets and Treasury impacts), which was 2 bp below our expectations (GSe 1.69%) and we note that NAB's 4Q22 NIM was 1.72% (up 10 bp on 3Q).
Goldman also points out that NAB has highlighted some headwinds facing the business in FY 2023. It explained:
Looking forward, NAB highlighted additional headwinds into FY23, noting: i) higher inflationary pressure on wages and vendor costs, ii) higher depreciation & amortisation of c.A$140 mn, iii) targeting productivity savings of c.A$400 mn, iv) overall Cost to Income ratio expected to trend lower, and v) investment spend expected to be c.A$1.5 bn.
The broker also notes that NAB stated that "housing lending competitive pressures [are] likely to intensify" and the "deposit mix headwind [is] accelerating, further increase in funding costs."
Should you buy the dip?
Goldman has a buy rating and $34.81 price target on the company's shares. Based on the current NAB share price, this implies potential upside of 12%.
Though, it is worth remembering that the broker could amend its recommendation and price target once it has adjusted its financial model to reflect today's result.
