The NAB result is interesting.
If you just glance at the high level data, things look quite fine. Bad debt provisions at just 12bps.
ROE at solid looking levels.
NIM looks a touch weaker, but still modestly above the trend of the past couple years.
It’s more the way NAB frames the data / operating environment in the result.
NIM pressures to continue, sounds bad.
And the arrears data do look a little worse when you zoom in.
But again, it is the descriptive comments the catch the eye. “Broad-based deterioration across loan types and regions”. Credit is a macroeconomic phenomena.
The business bank didn’t sound much better either. Firstly, the plot.
Then the framing. Those words “broad based deterioration” again.
This is one of those moments where I think you should take management commentary at face value.
Our own analysis of the data suggests things look okay. The banks numbers give us a bit more granularity, and look “broadly” okay. But their wording does not.
Now the banks pay a pretty good yield, and they are “pillars of the economy” and all that, so we aren’t saying rush to the exit. But we are underweight the sector, and might have to think about extending that underweight.
The banks are like the resources sector; so large in the benchmark, that if you miss the trade your relative performance can really suffer. That’s why we’ve got some exposure to them at pretty much all points in the cycle; but I think “less than usual” is fine, and definitely worth looking if one happens to be running a large overweight to them.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.