NAB: A voice of one calling in the wilderness

NAB has today announced after-tax remediation costs of $525m (91% wealth-related and the balance being banking-related) that will reduce 1H19 cash earnings by $325m and discontinued operations earnings by $200m (total remediation costs as at 31 March 2019 now just over $1.1bn). Excluding these items, underlying costs appear to have remained flat. This is further deck-clearing by acting CEO Philip Chronican, consistent with our view that he will do as much as possible to provide as little distraction for the incoming and permanent CEO. The statement that “…the Board will also review NAB’s dividend settings” when NAB releases its 1H19 result suggests we are on the right track in knocking back our 1H19 dividend expectation to 90cps.

NAB will announce its 1H19 result on Thursday 2 May 2019. Our revised forecasts are: (1) statutory earnings ~$2.78bn; (2) cash earnings ~$2.95bn; (3) cash EPS 107cps; (4) underlying cash earnings (i.e. excluding restructuring and customer remediation costs) ~$3.27bn; (5) underlying cash EPS 119cps; (6) fully franked interim dividend 90cps, ~83% cash payout ratio and ~75% underlying cash payout ratio (target 70-75%); (7) cash ROE 11.9%; (8) NIM 1.84%; (9) credit impairment charge $408m/13bp GLA; (10) cost to income ratio 44%; and (11) CET1 ratio 10.3%.