Top 3 ASX banking stocks to buy in FY24

TEAM VEYE | 10 February 2023

1. Bendigo and Adelaide Bank Ltd (ASX: BEN)

Bendigo and Adelaide Bank Limited (ASX: BEN) is an Australia-based banking and financial services company. The Company is engaged in delivering a wide range of banking and other financial services including consumer, residential, deposit-taking, payments services, wealth management and superannuation, treasury, and foreign exchange services. The Company operates through three segments: Consumer, Business and Agribusiness. Consumer is focused on engaging with and servicing customers and includes branch network (including community banks and alliance partners), mobile relationship managers, third party banking channels, wealth services, homesafe, call centres and customer support functions including processing centres. Business is focused on servicing customers, and includes business banking, portfolio funding, Delphi Bank, community sector banking and great southern. Agribusiness includes all banking services provided to agribusiness, rural and regional Australian communities through rural banks.
(Source: Refinitiv, Thomson Reuters)

From the Company Reports:

On 7 July 2022, Bendigo and Adelaide Bank announced that they had agreed to acquire the ANZ Investment Lending portfolio (“ANZIL”).

  • The acquisition will allow Bendigo and Adelaide Bank to further grow its margin lending business, Leveraged Equities Limited (“Leveraged Equities”), one of the leading and longest established margin lenders in Australia.
  • The value of the portfolio the Bank is acquiring is approximately $715m, with approximately 11,900 customer facilities (as of 31 May 2022).
  • The acquisition is expected to take the combined value of the Bank‟s margin lending portfolio to more than $2 billion at completion, which is expected to be in the first half of the calendar year 2023.
  • The acquisition is well aligned with the long-term objective of becoming Australia’s leading bank of choice with an objective of growing return on equity. It will be earnings accretive upon completion and will further strengthen Leveraged Equities’ position as an industry leader in margin lending and enhance the scale of its existing operations.

Financial Performance:

On 14 February 2022, BEN announced interim results for the half-year period that ended on 31 December 2021.

  • With its strong product profile and service levels, it attracted significant customers during the reporting period. BEN witnessed growth in the customer numbers, up by 3.4 % over the half to 2.12 million.
  • Cash earnings growth of 18.7 % to $260.7 million on the prior corresponding period
  • Statutory net profit up by 31.7% to $321.3 million.
  • Total income was up 2.9 % to $873.4 million
  • Net interest margin was down by 2.09%, down 14 basis points on 2H21
  • Credit expenses: ($17.8m write-back), down significantly
  • Common Equity Tier 1 (CET1) increased by 28 basis points to 9.85% and the board has approved a new CET1 target range of between 9.5% and 10%.
  • A robust balance sheet with high levels of capital levels
  • ROE equity reported above 8%.
  • The cost-to-income ratio was reported at 59.3% well in line with a target goal of 50% in the medium term.
  • Total lending increased by 2.1% to $73.8 billion.
  • Total funding increased by 5.1% on 2H21 to $81.9 billion with customer deposits up 6. % on 2H21.
  • The Group managed its daily Liquidity Coverage Ratio (LCR) requirement well in line with the regulatory minimum. The total weighted value of LCR was reported at 140.7% compared to 150.2% for the quarter ended on 31 December 2021.
  • Declared a dividend of 26.5 cents per share.

Industry Analysis:

As per the recent Industry analysis, the future of banking in Australia is expected to change drastically over the coming decade. Banking services are already accessible online with the number of active online banking users around the world set to continue to soar in the coming years. Despite COVID-19, 2021, the sector witnessed the continued proliferation of fintech and other non-bank lenders funding new originations through warehouse securitisations. The evolving financial technology (fintech) sector will likely continue to lead changes in the industry, while demographic, socio-economic, and regulation factors will also play a large role in shaping the banking industry across the country. The internet of things, cloud computing, artificial intelligence, and 5G are just a few of the technological capabilities predicted to impact the banking sector in the coming years. The demand is expected to remain strong, and lenders will have plenty of capital to deploy, sustaining growth for most of 2022.

Value Proposition:

  • P/E vs Sector: BEN with P/E at 11.03x sits at a good value proposition compared to Sector P/E at 30.46x. 
  • P/B vs Sector: BEN with P/B at 0.88x sits at a good value proposition compared to Sector P/B at 1.11x.

Relative Valuation:

(Source: Refinitiv, Thomson Reuters)

BEN with P/E (NTM) at 12.8x compared to Financials Sector P/E (NTM) at 15.1x, P/B at 0.9x compared to Banking Services Industry P/B (NTM) at 1.9x and Financials Sector P/B (NTM) at 2.5x and Dividend Yield (NTM) at 5.5% sits at a good value proposition.

Earnings forecasted to grow at a CAGR of 7.1% between FY22-FY26 *Forecasted Twelve Months or NTM (Next Twelve Months): of any financial metrics measure such as EV/Sales, EV/ EBITDA, or P/B, PCF, P/E is the calculation forecasted for the immediate next twelve months from the current date based on projections applied to the revenues, EBITDA etc.

*TTM or Trailing Twelve Months refers to a company’s past 12 consecutive months of performance data from the current date used in financial reporting.

Stock Valuations based on DCF:

Intrinsic value based on DCF is estimated at $10.65. The calculation takes into consideration a growth rate of 10% for the initial 5 years and thereafter a growth rate of 6.6%, WACC is calculated using a beta of 1.33 and is reported at 8%.

The stock currently trading at $10.59, while intrinsic value comes at $10.65,  indicating the stock is fairly priced and provides a good investment  opportunity at the current levels.

Peer Analysis:

(Source: Refinitiv, Thomson Reuters)

BEN with P/B of 0.88x, P/E at 11.03x, D/E of 81.2% and Return on common equity at 9.4%, sits relatively well among its peers.

Financial Metrics:

(Source: Refinitiv, Thomson Reuters)

BEN with year-on-year improvement in loan growth, up by 5.84% (year on year) to 10.71% (June 2021) and deposit growth of 10.44% (year on year) to 15.86% (June-2021) well above Industry deposit growth of 7.98%, improved Tier 1 risk-adjusted capital ratio and ROE improved by 5.25% (year on year) to 8.62% (June-2021) provides it with sound financial metrics.

Market Risk Analysis:

The major risks faced by banks are:

  • Credit risk
  • Operational, risk
  • Market and liquidity risks
  • Regulation Risk

Technical Analysis:

(Chart source: TradingView) Technical Chart-Monthly and Weekly Candlestick Price Chart Pattern

On a monthly chart, Fibonacci is drawn from a high at $11.69 in September 2019, to a swing low at $5.32 in March 2020, the retracement of more than 78.6% of the fall (indicated on charts) is already accomplished. The July 2022 month candle formed a “Bullish candle “completely inside the June 2022 candle. The August 2022 month opening above the July month closing and trading above the EMA (Exponential Moving Average) crossover indicates bullish potential in the stock. The price pattern trading above the Ichimoku cloud and increased volume activity signals upside momentum in the stock. The price levels between $10.6-$10.7 plays significant importance, and once the price manages its close above this, the upside momentum is expected to continue and push prices further upside in the medium to long term.

On a weekly price chart, the price move with “Higher Highs” and trading above the middle Bollinger band, outside the Ichimoku cloud and MACD (Moving Average Convergence and Divergence) positive crossover signals bullish momentum in the stock. With both the charts positioned upside, the upside momentum in the charts is expected in the medium to long term.

Outlook:

The residential loan growth is expected to exceed system growth and the seasonal return of agribusiness growth is expected to drive better near-term lending growth. However, challenges in the form of margin compression and non-recurring other income that will drive revenue lower in the second half cannot be ignored. BEN has moved 13% percent of its application to the cloud platform. The growing importance of the Community Bank model along with its strong connection with the customers will drive the future growth potential and will lead to improved efficiency. BEN focused on reducing, time to decision’ for its customers seeking a loan and expects to launch its fully digital home loan offering Up Home in the months ahead. There is a strong future for Margin Lending in Australia, and the acquisition of the ANZ Investment Lending portfolio will create further opportunities for growth.

Veye’s Take:

BEN with a market cap of $5.98B as of 10 August 2022 holds a well-diversified deposit and funding base without undue concentration. The bank maintains the highest NPS of any Australian listed bank at 29.7, more than 30 points above the industry average which remains in negative territory. BEN is focused on providing a high-quality solution and positioning itself as a trusted partner for customers who are just starting out on their investment journey, and clients under advice and investment. Disposal of the non-core assets and business lines, along with the migration of its applications to the cloud will result in an overall improvement in operating efficiency. The recent acquisition of the financial technology company Ferocia and digital bank Up has further accelerated its long-term strategy.

Veye recommends a” Buy” on” Bendigo and Adelaide Bank Limited “at the closing  price of $9.97 (As of 10 February 2023).

2. WESTPAC (ASX: WBC)

Westpac Banking Corporation is a banking company that provides a range of banking and financial services, including consumer, business, and institutional banking and wealth management services. The Company’s segments include Consumer, which provides a range of banking products and services, including mortgages, credit cards, personal loans, and savings and at-call deposits to customers in Australia; Business segment, which provides banking services and products to Australian small business, agribusiness, and commercial businesses and offers savings, transaction and lending products, including specialist services; Westpac Institutional Bank (WIB), which provides a range of financial services to commercial, corporate, institutional and government customers operating in Australia and New Zealand, Westpac New Zealand segment, which provides banking and wealth products and services for consumer, business and institutional customers and specialist businesses.

Stock Performance Profile:

(Chart Source: Trading View) One-year performance of WBC compared to the Australian Market Index (XJO) and Financial Market Index (XFJ). WBC recorded one year return of 12.2%.

From the Company Reports:

On 7 November 2022, Westpac Banking Corporation announced its full-year financial results for the year ending 30 September 2022.

Net interest income for the year was $17,161 million, up 2% compared with $16,858 million in FY21. There was a decline in non-interest revenue as a result of the loss on the sale of Australian life insurance and the income foregone due to business exits. Total revenue from business activities was $20,345 million.

In the Full Year 2022, the business reported a net profit of $5,694 million, an increase of 4% from the Full Year 2021, that was attributable to the owners of Westpac. The higher net profit was primarily caused by lower notable items and lower expenses, which were partially offset by a turnaround in impairment charges and lower non-interest income, which reflected the loss of earnings from divestments.

(Source: Company Reports)

At present, the bank has more than 12.7 million customers. The bank has a 20% market share in household deposits within Australia. WBC is also a leading bank in New Zealand having approx. 18% deposit market share in NZ.

(Source: Company Reports)

About 55% of the total deposits are made by households, followed by businesses and institutions. A rising interest rate environment can hinder corporate growth, but it can also be countered by increased home demand brought on by declining property prices.

The bank’s loan book totalled $744 billion as of September 30, 2022, and it was growing daily. Approximately 71% of the total loan book goes to housing, while 16% goes to businesses and 11% goes to institutions. 2% is reserved for others.

Investment Thesis:

The Australian banking business is going through a significant transformation. Digitalization in the banking sector is opening up a variety of opportunities, allowing banks to investigate new methods to create value and improve their customer service profiles. Westpac Banking Corporation is looking to increase its market dominance in Australia as well as in New Zealand. The bank has the potential and palling to enhance its performance. They are going through technological enhancement and CORE strategy, in which they will concentrate on the core banking operations. Which helps them to increase the customer experience and explore new opportunities to increase their earnings. A healthy dividend payout with a solid historical dividend distribution record brings it to the front line to attract long-term investors.

Financial Commentary:

(Source: Refinitiv, Thomson Reuters)

The per-share book value for the financial institution including the bank, which is a key financial indicator, shows positive growth for Westpac. The bank announced a notable increase in its BV from $18.84 (FY20) to $20.14. (FY22). It improves the bank’s price-to-book value and offers an alluring value to the business.

(Source: Refinitiv, Thomson Reuters)

The bank observed consistency in the total income over the previous five years. After the epidemic, it increased after dropping from FY2018 to FY2020. Over 740 billion in loans and receivables were recorded for the year. The $1 trillion threshold is reached in total assets in FY22. Fiscal 2022 saw an 8% return on equity. The bank has room to raise its return ratios going forward. Even after several economic troubles, the bank was able to keep its capital adequacy ratio at a satisfactory level.

Dividend History:

(Source: Refinitiv, Thomson Reuters & Company Reports)

Westpac Banking has a strong track record of dividend distribution. For a very long time, the bank has been rewarding its customers with annual (interim and final) cash dividends. Prior to 2020, the payout size was rather big, but because of the global pandemic’s economic effects, the bank declared lower dividends but did not altogether discontinue. Investors seeking a consistent dividend income get reasonably assured that the bank will not stop paying dividends in any challenging circumstances. Beginning with the 2020 fiscal year, the bank gradually increased the dividend per share. The corporation declared a 62-cent interim and final dividend per share for FY2022. The bank is a strong candidate for investment because of its investor-friendly strategy so that investors can benefit from a consistent and increasing dividend income each year.

Relative Valuation:

(Source: Refinitiv, Thomson Reuters)

The dividend yield on the next twelve-month basis of 6.1% is in line with the banking service industry and higher than the financial sector. Price-to-book value and the price-to-earnings multiple followed the same pattern. Earnings are forecasted to grow by 30.9% compared to Industry earnings growth of 4.3% in the next twelve months, significantly improving the price-to-earnings multiple in the next twelve months, thus providing good investment value.

*Forecasted Twelve Months or NTM (Next Twelve Months) is the calculation forecasted for the immediate next twelve months from the current date based on projections applied to the revenues, EBITDA, etc.

*TTM or Trailing Twelve Months refers to a company’s past 12 consecutive months of performance data from the current date used in financial reporting.

Peer Analysis:

(Source: Refinitiv, Thomson Reuters)

WBC having a price-to-book multiple of 1.16x and a return on equity of 8% as compared with peer metrics provides a good value. The dividend yield of 7.6% well above the average dividend yield of 5% provides a good investment option when compared with its peers.

Industry Analysis:

The global banking industry is undergoing a major transformative phase, with the majority of banking services can now be accessed with a single click by customers. These time-saving services improve the overall efficacy of the banking operations and secure a good reputation profile. Digitalization technology in the banking industry offers varied opportunities, thus enabling banks to explore ways to generate value and have enhanced customer service propositions. The transformation from a product-centric approach to a customer-centric approach provides different revenue streams, beyond the traditional product mix and thus adds value from added services that support end-to-end customer lifecycle. The banking industry as a whole is focusing on redefining the home lending experiences and reducing IT complexity with value enhancement through data analytics. Demographic, socio-economic, and regulation factors will also play a major role in shaping the banking industry across the country. The internet of things, cloud computing, artificial intelligence, and 5G are some of the technological capabilities that are expected to dominate its presence and are projected to impact the banking sector in the years ahead.

Market Risk:

  • The various risks inherent in WBC operations can be categorized as under:

    • Operational and Reputational risk: Failure to comply with policies, procedures, laws, and regulations, fraud, or forgery results in operational losses which impact the integrity and overall reputation.
    • Market Risk, Interest rate risk, and Credit Risk.
    • Regulatory Compliance.
    • Financial crime & Cyber Crime

Outlook:

Customer Outcomes and Risk Excellence (CORE) Program: through the CORE, the company aims to strengthen risk governance, improve accountability and enhance risk culture.

(Source: Company Reports)

Westpac Banking is undergoing a strategic simplification process to focus more on core banking businesses in Australia and New Zealand. The bank is exiting from some of the non-core businesses. It has sold six non-core businesses and realized approx. $1950m from these. The divestment of Westpac Life Insurance was completed in H2FY22 for approx. $500 million of realization.

In order to concentrate more on its core businesses in Australia and New Zealand, the bank is merging its worldwide sites. Westpac Banking Corporation reduced the number of locations it has in Asia from 5 to just one, which is Singapore. It shut down locations in Jakarta and Mumbai. The bank is also seeking to leave Beijing, Shanghai, and Hong Kong. This simplification will aid in lowering the bank’s geographic risks.

To increase productivity and shorten working hours, the bank is using technology across all of its banking activities. This will help it to control operating expenses and offer consumers better, faster, and more seamless services. They will boost the number of automated processes from 98 to 152. (As on 30 September 2021). In order to speed up approval times and make the process simpler for both consumers and bankers, the bank introduced a new digital mortgage application process.

Value Proposition:

The bank maintained the strength of the balance sheet to capture any upcoming growth opportunities. The company’s financial stability will further improve with enhanced net operating cash flow by 63.5% on a YoY basis. A price-to-book value of 1.1x offers the business an attractive value proposition. A dividend yield of 5.18% boosts the business’s worth.

Technical Analysis:

(Chart source: Trading View) Technical Chart- Weekly and Monthly Candlestick Price Chart Pattern

On a monthly t/f, the Fibonacci is drawn from a high of $39.75 in April 2015 to a low of $13.47 in March 2020. The intersection of the 200-day EMA (Exponential Moving Average) with the 38.2% Fibonacci level provides a strong zone at $23.59. The November month closing formed a long bullish candle with a solid body and no upside and downside wicks, indicating strong bullish potential in pushing the prices further upside.

On a weekly price chart, the stock is trading in a band with resistance at $24.28 and support at $23.06. The price at the current juncture has maintained the support at 14-day EMA. The indicators holding in a positive territory signal a bullish trend to be well intact.

With price patterns in different t/f holding above the 14-day EMA and indicators positioning upside, the bullish momentum in the stock is expected to continue.

Veye’s Take:

With a defined strategy and strong results, Westpac Banking Corporation is making progress. Even with inflationary pressure, FY22 was a successful year. In FY23, higher interest margins are anticipated primarily as a result of increased interest rates. The bank is proactively attempting cost reduction. By FY24, Westpac set a goal of bringing costs down to $8.6 billion. Lower expenses will enable bank to have increased margins. The bank will benefit from technological advancement by being able to serve customers better and gain market share. The bank is well-positioned to accomplish its business aim with a stronger emphasis on banking in its core markets of Australia and New Zealand, a healthy balance sheet, and a highly motivated team. A more streamlined banking system with fewer products, fewer overseas sites, and technological advancements will give the Bank a positive and forward-thinking atmosphere to boost performance. The forecasted metrics with P/E and P/B improving year on year, PE (NTM) at 11.2x (FY23) and P/B at 1.1x (FY23), and Dividend yield (FY23) of 6.10% provide a good investment opportunity. Veye recommends a “Buy” on “Westpac Banking Corporation” at the closing price of $23.84 (As of 10 February 2023).

3. NATIONAL AUSTRALIA BANK (ASX: NAB)

National Australia Bank Limited (ASX: NAB) is a financial services company. The Company’s segments include Business and Private Banking, Personal Banking, Corporate and Institutional Banking, New Zealand Banking and Corporate Functions and Others. Business and Private Banking focuses on small and medium customer segments, including specialized Agriculture, Health, Government, Education and Community Services. Personal Banking provides customers with products and services that provide home loans or manage personal finances through deposit, credit or personal loan facilities. Corporate and Institutional Banking provides a range of products and services including client coverage, corporate finance, markets, asset servicing, and transactional banking and enterprise payments. It consists of Partnership Banking, servicing retail, business, and private customers; Corporate and Institutional Banking, servicing corporate and institutional customers, and includes Markets Sales operations in New Zealand.

Stock Performance Profile:

(Chart Source: Trading View) one-year performance of NAB compared to the Financial sector (XFJ) and Australian Market index (XJO) and outperformed with one year return of 11.86%.

From the Company Reports:

On 9 November 2022, National Australia Bank Limited (ASX: NAB) announced its fourth quarter and full-year financial results for the period ending 30 September 2022.

During the fourth quarter of the financial year 2022, the bank reported $18,296 million in net operating income, 8.9% higher than the corresponding period last year. Underlying profit increased by 11.5% to $10,022 million in Q4FY22.

The Business & Private Banking sector generated cash earnings of $3,013 million in FY22, an increase of 21.5% from the previous year. Significant revenue growth reflecting high volume growth and greater margins, along with fewer credit impairment costs, are the main drivers of strong profitability growth. New Zealand Banking reported a 14.1% increase in cash earnings to NZ$1,403 million, while Corporate & Institutional Banking reported a 34.9% increase to $1,628 million.

(Source: Company Reports)

Investment Thesis:

The bank’s strong financial performance, as seen by its strong balance sheet and regular profitability, makes it a reliable and stable investment option. Its diversification across consumer banking, business banking, and wealth management reduces risk and offers a consistent flow of income. Investments made by NAB in technology and digital initiatives, together with its expanding online presence, have the potential to boost productivity and spur growth, both of which will eventually be advantageous to shareholders. The bank is well-positioned for future growth due to its recent strategic acquisitions, which have helped to boost its market share and revenue. The bank has a track record of delivering shareholders attractive dividends, giving investors a reliable income source.

Financial Matrices with Commentary:

(Source: Refinitiv, Thomson Reuters)

Interest and dividend income for the bank climbed in FY22 following a little dip in FY21. The total revenue is shrinking as a result of non-interest business revenue challenges. Even when SG&A costs marginally increased in accordance with the revenue percentage, NAB was still able to raise its net profit margins. The overall assets and deposits of the business are consistently rising, which reflects the bank’s expansion. The bank’s net operating cash flow improved significantly in FY22, which is encouraging for business operations.

(Source: Refinitiv, Thomson Reuters)

The company is increasing its total deposits on a regular basis. It is growing with a CAGR of 8.93% which is quite healthy. It indicates the expansion of the bank. The company significantly reduced its overall debt-to-total asset ratio.

(Source: Refinitiv, Thomson Reuters)

NAB‟s return on equity returned to the pre-pandemic level. The company’s total capital adequacy ratio stood at 18.2%, which reflects that the Bank has a sufficient level of capital to cover potential losses from its assets. The bank has a very strong liquidity position and a Liquidity Coverage Ratio (LCR) of 137% suggests that the bank has more than enough liquid assets to cover its short-term obligations. This gives the bank some protection in the event of an unanticipated financing gap, a rise in demand for cash withdrawals, or other short-term obligations. Additionally, it shows that the bank is well-equipped to manage any stressful situation and is unlikely to see a liquidity constraint anytime soon.

Dividend History:

(Source: Company Reports)

The bank has a solid history of paying out a sizable share of its revenues as dividends. The bank used to pay out bigger dividends per share before the pandemic, but during that challenging time, it decreased to 60 cents per share (FY20). Despite this, the bank continued to issue dividends to its shareholders. It exhibits its intense concern for its minority shareholders. Long-term shareholders can receive a passive income from the company’s enhanced fully franked dividend per share, making it a prudent investment.

Relative Valuation:

(Source: Refinitiv, Thomson Reuters)

The bank‟s EV/Sales are at very low and appealing levels as compared with the banking services industry and financial sector. A ratio of 13.6 times EV/EBITDA is lower than the sector average and comparable to the industry average. When the sector and industry averages are between 25 and 40 times, a price-to-earnings multiple of 11.6 times on an NTM basis is extremely appealing. Along with a fair dividend yield, NAB’s P/B is in line with the industry, which makes it a strong investment choice for long-term investments.

*Forecasted Twelve Months or NTM (Next Twelve Months): of any financial metrics measure such as EV/Sales, EV/ EBITDA, or P/B, PCF, P/E is the calculation forecasted for the immediate next twelve months from the current date based on projections applied to the revenues, EBITDA, etc.

*TTM or Trailing Twelve Months refers to a company’s past 12 consecutive months of performance data from the current date used in financial reporting.

Peer Analysis:

(Source: Refinitiv, Thomson Reuters)

In comparison to its competitors, the bank’s valuations are extremely attractive. NAB’s PE of 14.97 times is comparable to that of other banks. With an ROE higher than most banks, price-to-book value is fairly attractive. An attractive dividend yield, makes it further appealing as a long-term investment.

Industry Analysis:

The banking industry in Australia is expected to witness transformative modifications over the coming decade. Digitalisation is already leading to changes in customer behaviour. The banks making their services easily accessible now will involve the use of the latest technology. Returning to rising rates will fuel regular product innovation to stay competitive. Banks would encourage the use of apps aided by data analytics.

Market Risk:

  • Credit risk
  • Liquidity challenges
  • Operational risks
  • Regulatory issues
  • Government Policies
  • Technological advancements

Outlook:

The acquisition of Citi’s Australian Consumer Business will result in better financial results for the upcoming quarter of the current fiscal year. NAB is expected to be the country’s second-largest issuer of credit cards following this transaction.

The NAB is working to enhance its technological presence. 62% of the bank’s apps were cloud-based as of March 2022. By scaling this up, the bank aims to run at least 80% of its software in the cloud. The bank may reach out to more consumers with this technological advancement and give them loans through a simplified process (particularly home loans) to acquire a greater market share. Based on the global climate of rising interest rates, NAB may report higher NIMs in the upcoming quarters. The globe is transitioning quickly from conventional to renewable energy sources. NAB will become the top Australian bank for international renewables transactions as a result of the target of increasing environmental financing to $70 billion by the year 2025.

(Source: Company Reports)

Expected incremental investment spending of $100 million in FY23 includes greater investment in systems that support long-term growth while maintaining discretionary project spending. The asset quality of the National Australia Bank is constantly being improved. The percentage of gross loans and acceptances that were 90+ days past due and gross impaired assets during the year was 0.66%, which was an improvement from the previous year. A decrease in the outstanding risk-weighted assets as a result of improved asset quality will protect the bank’s capital. The bank is targeting an improved ratio in FY23. NAB started the additional buy-back in mid-May 2022 and completed it in the entire fiscal year that concluded on 30 September 2022, purchasing 134,952,672 ordinary shares for $3.9 billion, including $1.9 billion (0.44% of CET1 capital) in the interim period.

Technical Analysis:

(Chart source: TradingView) Monthly and Weekly Candlestick Price Chart Pattern)

The Fibonacci is drawn from a high of $37.73 in April 2015 to a low of $13.20 in March 2020. The stock price has retraced almost 78.6% of the fall. The intersection of the 14/50/200-day EMA (Exponential Moving Average) with a 50% Fibonacci level provides strong support at $25.52. The bearish move in the stock between November and December 2022 has taken a halt and taken strong support at the 14- day EMA. The price pattern at the current juncture is strongly rejecting the downside. The resistance at $32.53 once breached will push the stock to trade further upside. On a weekly t/f, the stock price is trading above the middle Bollinger band and near the close of the previous week. The overall bullish trend remains intact with price trading above the EMAs and indicators holding in an upside trajectory, signaling bullish potential in the stock.

Veye Take:

NAB is engaged in a variety of industries, including business banking, consumer banking, and others. This diversity generates a consistent flow of income while reducing risk. A rise in consumer and commercial lending, development into new regions, and acquisitions of other financial institutions might all be growth drivers for National Australia Bank (NAB). The bank is investing in technological and digital initiatives to enhance the customer experience and boost productivity. This might promote expansion and raise profitability. Economic factors like low-interest rates in the future and solid GDP growth may also support the bank’s expansion. Asset quality is getting better, which boosts investor confidence. The acquisition of Citi’s Australian Consumer Business will speed up future revenue growth. The bank has a history of delivering shareholders significant dividends, giving them a consistent stream of income. Currently, NAB is trading at a market capitalization of $99.22 billion. With an expected EPS of $2.5 for FY24, it is available at a very low and attractive PE multiple of 12.6 times. Veye recommends a “Buy” on “National Australia Bank Limited” at the closing price of $31.68 (As of 10 February 2023).

 Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.

ACN 623 120 865 | ABN 58 623 120 865
Copyrights© 2018 veye