National Australia Bank Ltd (ASX: NAB) shares will be in focus next week.
That's because the big four bank is scheduled to release its first quarter update before the market open on 21 February.
Ahead of the release, let's take a look to see what the market is expecting from NAB.
Image source: Getty Images
NAB first quarter preview
With NAB shares trading within a whisker of a 52-week high, you might think that expectations are high going into this update.
Though, that's not necessarily the case.
As a reminder, a year ago, NAB released its quarterly update and revealed cash earnings of $2.15 billion.
The market isn't expecting a result anywhere near that level next week.
For example, according to a note out of Citi, its analysts are expecting NAB to report cash earnings of $1.8 billion for the three months. This represents a year on year decline of approximately 16%.
In addition, it worth noting that Citi's estimate is actually 4% ahead of the consensus estimate for cash earnings of $1.73 billion.
Citi is expecting the bank to outperform expectations thanks largely to lower than expected bad and doubtful debts. Its analysts believe the market is being too negative on its credit quality assumptions.
The broker also believes that NAB's net interest margin will be stronger than expected and that its CET1 ratio will only ease to 11.9% from 12.2% at the end of June.
Interestingly, despite the above, the broker has reiterated its sell rating and $25.75 price target on the bank's shares. This implies almost 22% downside for NAB shares over the next 12 months.
