NAB - National Australia Bank

[PZ99]

It's tempting but I'm waiting until after the results (1st Nov) before topping up.

 

[sptrawler]

24.53 the low? The gross div. yield must be a respectable percentage now?

The problem is, we don't know what the dividend will be, yet.

 

[sptrawler]

It's tempting but I'm waiting until after the results (1st Nov) before topping up.

If Wall street keeps sliding, so will the ASX, add to that a poor AGM report = buying opportunity. IMO

 

[PZ99]

Net profit rose by 5.1% to 5.55 billion Australian dollars (US$3.95 billion) in the year through September from A$5.29 billion the prior year

Divvy remains at 99c

 

[Klogg]

Net profit rose by 5.1% to 5.55 billion Australian dollars (US$3.95 billion) in the year through September from A$5.29 billion the prior year

Divvy remains at 99c

Banks' dividends are at risk.

Underlying earnings for NAB and ANZ both down, expenses up significantly, and their profit engine (home loans) are slowing. Who knows how long that goes, but it's hard to see the effects of the RC waning any time soon.

Add to that the AUDUSD yield spread, and you risk overseas funding becoming more expensive once more.

All of this at a time when credit impairments are at all time lows.

This feels like picking up pennies in front of a steamroller.

 

[PZ99]

Agreed. Worth noting the NAB went through all this 5 years ago from compensating UK customers and other write offs. Next year they lose around 6000 jobs off their payroll. Hard to tell where to from here but even a 10% cut in the divvy is good value at this current price.

Project opening above $25.50 at 9.55am - a short term rebound could be on the cards

https://www.abc.net.au/news/2018-11-01/nab-full-year-results-2018/10453522

 

[willy1111]

... and their profit engine (home loans) are slowing. Who knows how long that goes, but it's hard to see the effects of the RC waning any time soon.

Add to that the AUDUSD yield spread, and you risk overseas funding becoming more expensive once more.

All of this at a time when credit impairments are at all time lows.

If they maintain market share with home loans I fail to see how earnings there slow as they continue to make spread on existing customers?

Rising US funding costs would just be passed onto customers via interest rate rises.

Maybe delinquency rates will rise if rates rise, but 5 yr fixed rates are still very attractive by historical standards so maybe not as big a risk as expected? Those that are on the brink would be likely looking at fixed rates.

The risk is job losses or unexpected illness that lead to loss of income resulting in inability to repay loans...that has always been the major risk...maybe Australia goes into recession in the next few years and there are widespread job losses resulting in a spike in bad debts?

 

[Klogg]

If they maintain market share with home loans I fail to see how earnings there slow as they continue to make spread on existing customers?

Rising US funding costs would just be passed onto customers via interest rate rises.

Maybe delinquency rates will rise if rates rise, but 5 yr fixed rates are still very attractive by historical standards so maybe not as big a risk as expected? Those that are on the brink would be likely looking at fixed rates.

The risk is job losses or unexpected illness that lead to loss of income resulting in inability to repay loans...that has always been the major risk...maybe Australia goes into recession in the next few years and there are widespread job losses resulting in a spike in bad debts?

Continually passing on costs to customers when they're already stretched isn't a great long term strategy. Default rates are low because funding costs and inflation are low.

If the AUD tanks, funding costs rise... at least until imported inflation shows up and rates are hiked. At which point the customer struggles to make payments. Defaults are low because rates are low... and prices are falling even with low default rates.
5 year fixed rates may look good, but that's all relative to the price of hedging for the bank. So it's the market setting the price, and we know the market is not always right (although it is a lot of the time).

Whether unemployment is the leading indicator or a result of a soft housing market shouldn't be assumed. One could argue that lower prices simultaneously cause defaults (developers can't make ends meet as easily) and unemployment (because dwelling construction slows).

It's worth mentioning that house prices are falling even when credit is growing at over 5% p.a. Imagine what happens if that flat-lines. Negative equity on some of the book is a starting point... with some other types of reinforcing feedback to follow.

These are very high level macro ideas, so they're not set in stone. But investing in banks just over the peak of the credit cycle is not where I want to be (although it can end well).

 

[notting]

Yeah but the housing unwind is very civilized and they've stopped and reigned in the interest rate only loans which means those that bought overpriced houses at the top are still slowly managing to chip away at the capital and hence there is a slow deleveraging taking place as well whilst the softening housing market occurs - very healthy!!
So the risks are pretty mild.
It seemed the whole universe was holding it's breath to see if NAB was going to keep it's dividend at the current rate to decide whether or not it was a screaming buy, and it has!
So for medium to longer term great tax free returns, what else would you buy given the size stability and the fact it is remaining very profitable over the course of having everything but the kitchen sink thrown at it?!!

 

[PZ99]

It probably will hit the 25's today going off the US + ASX futures.

NAB reports in about 3 weeks as well - could touch 24's, then 23's after the divvy..

If we're lucky

Well I was a dollar out but topped up today anyway. You only live once

 

[tinhat]

NAB is now sitting just below the 61.8% fibonacci retracement level of the post GFC run from 2009 to 2015 and has hit the double bottoms of March and June 2016. I bought some more today.

 

[tinhat]

Every time I log into commsec I end up buying more NAB. I bought again today. It's like going to the fish markets at Christmas and everyone is buying salmon and lobster and prawns and there is a dude in the corner with a whole crate of slimy mackerel and he can't even give it away.

It's going to be a slimy mackerel Christmas with just me and a crate of stinking NAB shares sitting in the corner! Enjoy your lobster!

 

[sptrawler]

Every time I log into commsec I end up buying more NAB. I bought again today. It's like going to the fish markets at Christmas and everyone is buying salmon and lobster and prawns and there is a dude in the corner with a whole crate of slimy mackerel and he can't even give it away.

It's going to be a slimy mackerel Christmas with just me and a crate of stinking NAB shares sitting in the corner! Enjoy your lobster!

My guess is, in the end you will be eating the salmon and lobster, most will be eating slimy mackerel.
Then they will point at you, because you are one of those lucky people, who woke up one morning well off.
People have choices they can buy shares, save and eat mackerel now, then hopefully eat salmon and lobster later.
Or they can eat salmon and lobster now and try to accumulate wealth later, which is a much harder proposition.

 

[Ann]

Here is a chart for NAB travelling in and failing an 11 year old equilateral triangle. It now sits on a support level of around $24. My guess is it will fall and test the $20 level, as its last high of $34 was lower than the previous high of $37. I have added a Fibbo for those who look at them.

 

[coolcup]

Here is a chart for NAB travelling in and failing an 11 year old equilateral triangle. It now sits on a support level of around $24. My guess is it will fall and test the $20 level, as its last high of $34 was lower than the previous high of $37. I have added a Fibbo for those who look at them.

View attachment 90343

That is one scary long term view!!!

 

[sptrawler]

That is one scary long term view!!!

That is the problem with investing.

 

[Wysiwyg]

Here is a chart for NAB travelling in and failing an 11 year old equilateral triangle. It now sits on a support level of around $24. My guess is it will fall and test the $20 level, as its last high of $34 was lower than the previous high of $37. I have added a Fibbo for those who look at them.

Around $20 is insane considering NAB are currently ($24.35) gross yielding +11% and forever have maintained or raised(discount GFC). Bring on $20 NAB ......

 

[Wysiwyg]

The problem is, we don't know what the dividend will be, yet.

Check dividend history and tell me when the dividend has been cut beside the one in lifetime GFC?

 

[PZ99]

Forget $20. If they do cut the divvy it'll go straight to the teens.

Then again - each divvy is 99c taken off the share price anyway.

Maybe they could put Malcolm Turnbull on as CEO - that would be funny after the RC

 

[InsvestoBoy]

This is stuck in my head:
https://www.afr.com/news/economy/employment/uncovering-the-big-aussie-short-20160223-gn130w

"Australian banks require large scale wholesale funding. In the event of a banking crisis, it will be difficult to roll the wholesale funding without any public sector guarantees. The Reserve Bank of Australia will guarantee the banks and charge a fee, as it did in the 2008 financial crisis. We anticipate most bank shares will cut dividends entirely, raise capital and stock prices will likely decline 80 per cent." He also predicted the Australia dollar could trade to 40c against the United States dollar.

I think it's very hard to argue with the first sentence of that quote. And if you include a wholesale funding disruption in your list of "risks that might actually happen", then the rest of it follows fairly naturally.