National Australia bank Limited (ASX: NAB) 

National Australia bank Limited (ASX: NAB) operates in the financial services industry via two segments, namely, Business and Private Banking.

Recommendation Rationale – SELL at AUD 29.149

• Financial Performance: In 1HFY23, NAB witnessed 19.3% PcP, largely owing to Citi consumer business, higher margins alongside favourable volumes. Net Interest Margin surged by 14 bps and stood at 1.77%, illustrating higher earnings on deposits and capital. During 3QFY23, the company delivered unaudited statutory net profit of AUD 1.75bn, owing to implementation of its disciplined strategies.
• Outlook: In FY23, NAB expects to render productivity benefits of nearly AUD 400mn to combat inflationary pressures. FY23 funding task is well advanced due to AUD 23bn raised in 1HFY23.
• Emerging Risks: In Australia, the overall growth and consumption has commenced softening which illustrated the impact of monetary policy tightening.
• Overvalued Multiples: On a forward 12-month basis, key valuation multiples (EV/Sales, Price/Earnings, Price/Book Value, and Price/Cash Flow) are higher than the median of Banking Serives.

NAB Daily Chart

Valuation Methodology: Price/Book Approach (FY24E) (Illustrative)

Considering the changes in foreign currency and interest rates, softening of overall growth and consumption, monetary policy tightening, etc., the company might trade at a slight discount to its peers. For valuation, few peers like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), and other have been considered. Considering the changes in market sentiments, stock price hovering near the first resistance, current trading levels and risks associated, it is prudent to book profit at the current levels. Hence, a 'Sell' rating is given on the stock at the closing market price of AUD 29.149, up by ~0.656% as on 10 October 2023.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for price data is based on October 10, 2023, and all other data such as technical indicators, support, and resistance levels are as of October 11, 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement. 

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