NAB shares hit 52-week high on first-quarter earnings beat

NAB appears on track to at least deliver on first-half expectations.

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National Australia Bank Ltd (ASX: NAB) shares are pushing higher on Wednesday morning.

At the time of writing, the banking giant's shares are up 1% to a 52-week high of $33.85

Why are NAB shares rising?

Investors have been buying the bank's shares this morning after responding positively to its first-quarter update.

For the first quarter, NAB reported cash earnings of $1.8 billion, which represents a 16.9% decline compared to the prior corresponding period.

However, this was better than the market was expecting, which explains why its shares are rising today.

Goldman Sachs was pleased with the update, noting that NAB is on course to at least deliver on its estimates during the first half of FY 2024. It said:

NAB has released its 1Q24 trading update, with unaudited cash earnings from continuing operations of A$1.8 bn, down -3% on the 2H23 quarterly average, but run-rating in-line with what was implied by our prior 1H24E forecasts. PPOP was 1% ahead of what was implied by our prior 1H24E forecasts, driven by lower expenses, and while BDDs were also lower, this was offset by a higher tax rate.

In response to the update, the broker has reiterated its buy rating with an improved price target of $33.73 (from $31.17). Though, it is worth noting that NAB shares have just pushed beyond this price target.

Goldman concludes:

We reiterate our Buy on NAB given: i) while lending competition remains, it has been skewed more heavily towards housing as opposed to business, which should benefit NAB's relative earnings mix, ii) NAB has delivered the highest levels of productivity over the last three years and its investments continue to yield benefits (A$400 mn of productivity expected in FY24E), which we think leaves it well positioned for an environment of elevated inflationary pressure, which was evidenced in 1Q24, and iii) despite being overweight SME lending, which is inherently riskier than housing, NAB remains well provisioned (CP/RWA ratio above peer levels) and asset quality remains strong, which management attributed to the quality of its book and its security.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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