NAB half-year profit grows by 23%

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CBA.AX77.48+0.330
NAB.AX35.30+0.120
WBC.AX34.90+0.310

With the interest rate cut Tuesday, many investors of the National Australia Bank (NAB.AX) have eagerly anticipated results from the nation’s fourth biggest lender. It was worth the wait, with the bank declaring net profit up 23% to $2.52 billion. CEO Cameron Clyne said the improved performance was due to higher revenue from personal and wholesale banking.

With ANZ (ANZ.AX) reporting stellar results last week, the market sent its share price up over 5% in one day of trading. However, ANZ has continually remained the most efficient domestic lender, has a huge overseas operation already making money and by P/E, it is still the cheapest of the five biggest banks.

Last week, Westpac (WBC.AX) also reported an astounding profit; the second largest Australian bank by market value impressed investors by declaring a net profit of $3.30 billion. However, after selling the company’s share price up 2% on the day, investors have since sold down the company 2%.

The Commonwealth Bank (CBA.AX) has retained its dominance at the top of the banking world. With a market capital of $113,125 million, the company reported NPAT up 1% to $3.66 billion for the second half of last year but some believe it may, along with the other big banks, be in a bubble. Its share price has increased 51% in the past 12 months although its P/E ratio still remains healthy, currently at 15.05.

The NAB has passed on Tuesday’s rate cut in full, remaining a slim title as having the cheapest mortgage of the big four banks since ‘breaking up’ with them in 2011. Today’s results may take time to sink in with investors however its long-term domestic outlook looks positive as it continues to attract home loans for a cheaper rate than its rivals. This is likely to continue in the near future as the government looks to drop interest rates further.

Foolish takeaway

Analysts tipped the NAB would raise the big four banks combined profit to over $13 billion and todays results have proved once again that Australian banks are some of the most profitable in the world for their size. If we consider the global outlook for many banks, the NAB declared a fully franked dividend of 93 cents per share up 90 cents from this time last year, and has potential for growth. It makes me think that investors could do much worse than add Australia’s number 4 bank to their portfolio.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz owns shares in ANZ.

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