The first half 2011 cash Net Profit After Tax of $2.7bn increased 21.7% on first half 2010 and was in line with our forecast.
Revenue growth of 6.8% more than offsets the 3.4% increase in expenses and the 25.5% boost in non-interest income was a standout, with Markets & Treasury and revaluation gains on structured asset portfolios contributing.
NAB had a sharp fall in bad debts reported in 2010 and this continued into the first half of 2011 but at a slower rate. The ratio of bad debts to average loans improved, but remains above the pre-GFC medium-term average.
Impaired asset levels are stable but remain elevated.
We like the result, particularly the top-line revenue growth, and on balance the bank continues to recover from the poor performances of 2008 and 2009. Business momentum is building, particularly in Personal Banking and Business Banking, while Wealth Management remains leveraged to investment market performance.
The stock has dipped back to $26.20 on the current market pull back making it a must buy for serious portfolios.
We have a price target on the stock of $30.00.
NAB should be a core holding and while it is paying a gross yield of 8.8%, topping up your holding at these levels or starting to build an exposure to this company makes a lot of sense.
For more information on NAB please contact us on 07 4771 4577.