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NAB dividend expected to rise

Melbourne in Australia with tram outside of Flinders Street railway station

National Australia Bank (AU:NAB) will give its first-quarter trading update on Thursday, 10 February.

In November, National Australia Bank beat earnings estimates, but flagged continuing pressure on lending margins.

Cash profit was $6.56 billion for the year ended September 30 and the bank released $217 million of provisions it had set aside for the Covid-19 pandemic fallout.

Extremely low interest rates have driven a huge rise in home prices and helped the Australian economy rebound from the coronavirus pandemic, but have also hurt bank margins - driving a 28% slide in NAB's markets income for that year.

NAB's net interest margin NIM, a key measure of bank profitability, was 6 basis points lower to 1.71% for the year. National Australia Bank has been expanding its mortgage book more quickly than the other big four banks in recent months and is expected to show strong momentum in mortgages on Thursday.

Commonwealth Bank’s half-year results announcement on Wednesday showed a sharp drop in net interest margin, dropping 14 basis points to 1.92% in the half, compared to the prior six months. It’s a metric that will be closely watched, given the current fierce competition in the mortgage market.

In November, NAB declared a dividend of 67c a share, more than double last year's payout.

Goldman Sachs is bullish on NAB shares, describing NAB as “our preferred major bank exposure”. Goldman expects NAB will deliver a dividend pay rise in 2022, and again in 2023 and 2024. Goldman is expecting $1.43 in dividends per share for 2022.

Investing.com gives an analyst consensus 12-month price target of $30.18. Shares are currently trading around $28. Nine analysts have an Outperform recommendation on the stock, five are Neutral and there are no Sell ratings on NAB.

The S&P/ASX 200 closed up Wednesday, gaining 81.40 points or 1.13% to 7,268.10 and crossing above its 20-day moving average. US futures are gaining.

Computershare was 12.4% higher and Imugene rose 6.6%. Commonwealth Bank closed up 5.7% for the day following a solid half-year earnings report.

Commonwealth Bank announced it will return a further $2bn to shareholders as the nation’s biggest lender delivered a jump in interim profit, but warned of persistent competitive pressure on loan margins.

CBA’s cash profit climbed 23% to $4.75bn for the six months ended December 31 supported by strong mortgage and business loan growth and lower bad debts, compared to the same period a year earlier. Analysts' expectations were for an interim profit of $4.35bn.

The bank flagged a $2bn on-market buyback of shares, following a record $6bn buyback that CBA completed last year.

The bank’s board declared a dividend of $1.75 a share, fully franked, up from a $1.50 interim dividend a year ago, but less than the second-half payment of $2. The dividend is paid February 17.

The Aussie dollar is at US71.66c against the US dollar.

Bitcoin is at $US43,180.

Gold is at $US1827.96 an ounce.

Brent crude oil is around $US91.69 a barrel.

WTI crude oil is at $US90.00 a barrel.


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