Next Tuesday, National Australia Bank Ltd (ASX: NAB) shares will be in focus when the banking giant releases its third-quarter update.
But what should shareholders be looking out for? Let's take a look.
What should you expect from NAB?
Quarterly updates are not as widely covered by analysts as half-year results. This makes it is difficult to gauge what exactly the market is expecting from NAB for the quarter.
However, what we can do is see if the bank is tracking towards full-year expectations.
For example, Goldman Sachs is expecting NAB to record a net interest margin (NIM) of 1.75% in FY 2023.
During the first half, NAB's NIM came in at 1.77%. So, clearly, some weakness is expected during the quarter if its NIM will average 1.75% for the full year.
If the bank's third-quarter update suggests that its NIM could be better in FY 2023, then NAB shares could rally on the news. Though, it is worth acknowledging that it could be the opposite if its NIM looks set to fall further than Goldman's estimate.
Investors may also want to look for commentary on its margin outlook beyond the fourth quarter. Goldman is expecting NAB's NIM to fall to 1.67% in FY 2024 and then 1.62% in FY 2025.
What about its earnings?
During the first half, NAB reported cash earnings of $4,070 million. This was an increase of 17% over the prior corresponding period.
However, with Goldman expecting FY 2023 cash earnings to grow 8.75% to $7,726 million, this implies second-half cash earnings of $3,656 million.
This suggests that NAB's second-half cash earnings will rise only ~1% year over year.
As with its margins, if NAB's third-quarter earnings hint that its second-half earnings growth could be stronger, don't be surprised to see its shares rise on the news.
Are NAB shares a buy?
Goldman currently has a buy rating and a $30.69 price target on its shares.
This suggests that the NAB share price could rise 8% from current levels.
