Is the National Australia Bank Ltd (ASX: NAB) share price a buy?
The major ASX bank announced its half-year result today and it wasn't pretty view. Cash earnings were down 51.4% to $1.436 billion. Excluding large notable items of just over $1 billion, cash earnings were still down 24.6% to $2.47 billion.
Considering all of the economic pain caused by the coronavirus, it's somewhat impressive that NAB still managed to make a decent profit.
The question is whether NAB shares are worth buying now.
NAB's dividend doesn't look as good any more. The NAB board decided to cut the interim dividend to just $0.30 per share. That still gives the retirees something, but not a lot. But at the same time NAB is raising around $3.5 billion to strengthen the balance sheet at a discounted share price. Seems a bit odd to both raise capital and pay a dividend.
The next 12 months could be very rough for NAB. Its percentage of overdue loans continues to rise, as it has for the past four halves despite the lowering of interest rates.
NAB HY20 charges included $828 million of additional collective provisions. This is a lot of pain in just a couple of months. There could be a lot more pain in the second half of the financial year.
Is the NAB share price a buy?
Before the trading halt the NAB share price had already fallen by 42.5%, so it's not as though this pain is a surprise to the market.
The main question will be how quick the economy can get back to work. The restrictions are being dictated by the unpredictable coronavirus, though Australia has done very well to limit the spread to very low numbers in the past few days.
NAB could be a strong performer over three years. But it could also take years before getting back to a profit number similar to FY19. I don't think it's going to be a quick recovery. I can't see a short-term positive catalyst for the NAB share price right now.
