Own NAB shares? Here's your half-year results preview

What does the market expect from this banking giant next week?

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Next week will be a big one for National Australia Bank Ltd (ASX: NAB) shares.

That's because the company will be kicking off earnings season in the banking sector when it releases its half-year results next Thursday.

Ahead of the release of its results, let's now take a look at what the market is expecting from the bank.

NAB half-year results preview

According to a note out of Goldman Sachs, its analysts are expecting the bank to report a reasonably sharp decline in cash earnings for the half.

The broker has pencilled in first-half cash earnings (before one-offs) of $3,513 million, which represents a 13% reduction on the prior corresponding period. This is a touch lower than the consensus estimate of $3,553 million.

As for dividends, Goldman expects NAB to declare an 81 cents per share fully franked interim dividend. This is down 2.4% on last year's interim dividend. Whereas the consensus estimate is for NAB to keep its interim dividend flat year on year at 83 cents per share.

What else should you look out for?

Goldman thinks that investors should keep an eye on the company's costs, which are being impacted by inflationary pressures. The broker said:

In the current soft revenue and sticky inflationary environment, we are of the view the key to offsetting these inflationary pressures will be the banks' ability to deliver productivity improvements. As such we will be interested to see to what extent NAB can continue to extract productivity benefits post FY24 at a similar level to recent years (c. A$400 mn). We currently forecast 1H24E underlying expense growth of +5.7% on pcp.

The broker sees potential for provision releases from NAB due to its overweight exposure to business banking. It adds:

In a deteriorating macro environment, it is the commercial (rather than housing) side of the book which drives loan losses and where most asset quality issues arise. Given NAB's relative skew towards business banking, and its relatively high level of CP/CRWA vs peers (1.45% 1H24 GSe), we see potential for provision releases if the economy continues its path towards a soft landing. Management highlighted that while arrears increased in the half (2H23), these were not flowing into impairments, which management attributed to the quality of its book and its security.

Are NAB shares a buy?

Despite forecasting lower than consensus earnings and dividends, Goldman rates NAB shares as buy.

However, its price target of $33.89 is largely in line with where they trade right now. So, investors may be better off waiting for a pullback before considering an investment.

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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