Analyst Note| Nathan Zaia |
We retain our AUD 30 fair value estimate on wide-moat-rated National Australia Bank after a solid first-half fiscal 2023 result. Cash profit increased 12.3% on the second half of 2022 to AUD 4.1 billion, with profit before bad debt expenses up an even more impressive 18.5%. The benefit of higher cash rates the key driver, evidenced by net interest margin, or NIM, of 1.77% in the half compared with a low point of 1.63% in first-half 2022. But, it appears margins peaked sooner and lower than we anticipated on intense competition to retain home loan customers and customer deposit competition. The business and private banking division delivered much better margin expansion than the retail bank, testament to National Australia Bank’s market position as major bank peers have been vocal about growing in this part of the market. The technology and banker investments, plus long-standing relationships, working in the bank's favour.