Are NAB shares a buy following the bank's results?

Let's see what Goldman Sachs is saying about the big four bank.

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National Australia Bank Ltd (ASX: NAB) shares had a good session on Thursday.

In response to the banking giant's half-year results release, investors bid its shares 1.5% higher to end the day at $34.28.

This means that the big four bank's shares are now up almost 12% since the start of the year.

What did NAB report?

For the six months ended 31 March, the bank reported a 13% decline in cash earnings to $3.5 billion. Despite this decline, the NAB board increased its interim dividend slightly to a fully franked 84 cents per share and announced an additional $1.5 billion on-market share buyback.

Goldman Sachs was pleased with the bank's results, noting that its earnings were in line and its dividend was ahead of expectations. It said:

NAB's 1H24 cash earnings were down -13% on pcp and +1% above GSe and broadly in line with Visible Alpha Consensus (VAe). NAB's 1H24 CET1 ratio of 12.15% (globally harmonized 17.5%) was down 7 bp hoh and broadly in line with GSe. Management announced an A$1.5 bn top up of its existing buyback, which still has A$0.2 bn remaining. NAB's interim 2024 dividend of 84¢ was above our 81¢ forecast and represented a 1H payout ratio of 73% (GSe 72%), and there will be no DRP discount, and the DRP will be neutralised via an on-market purchase of shares.

Should you buy NAB shares?

Goldman Sachs has responded to the result by retaining its buy rating on the bank's shares. However, it is worth noting that Goldman's price target of $34.04 is a touch lower than where NAB's shares currently trade. This could mean it is worth waiting for a pullback before considering an investment.

Commenting on its buy rating, the broker said:

We remain Buy rated on NAB given: i) despite being overweight SME lending (inherently riskier than housing), asset quality remains strong with management highlighting credit losses appear to be deviating vs. history for the better and the bank is well provisioned (CP/RWA ratio above peer levels), ii) while lending competition is intense, it has been skewed more heavily towards housing as opposed to business (refer here), which should benefit NAB's relative earnings mix, iii) we see more capacity for loan growth in the commercial sector vs. the household sector, which should also benefit NAB's business mix, and iv) NAB continues to manage costs effectively and leads in delivering productivity benefits (A$400 mn expected in FY24E), which we think leaves it well positioned for an environment of elevated inflationary pressure.

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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