The NAB (ASX:NAB) share price is up after 47% profit growth in Q1

The National Australia Bank Ltd (ASX:NAB) share price is rising after revealing 47% profit growth in the FY21 first quarter.

| More on:
city building with banking share prices, anz share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The National Australia Bank Ltd (ASX: NAB) share price is up 0.7% after revealing substantial profit growth in the first quarter of FY21.

NAB profit

The big bank revealed that its first quarter cash earnings of $1.65 billion were 47% higher than the FY20 second half quarterly average. This was primarily driven by low credit impairment charges. At the underlying level, NAB said that performance has been sound in the current competitive, low interest rate environment. Statutory profit generation amounted to $1.7 billion.

NAB reported that its credit impairment charges fell 98% compared with the second hand quarterly average, to $15 million.

Revenue declined 3%, reflecting lower markets and treasury income, mainly because of the one-off reversal of mark-to-market reversal of losses in the second half of FY20. Excluding markets and treasury, revenue grew 1% with higher fees and commissions income benefiting from increased levels of business activity.

The net interest margin (NIM) declined but was stable excluding the impact of markets and treasury and higher liquids. NAB explained that competition and the impact of low interest rates were offset by home loan repricing and lower funding and deposit costs.

NAB's expenses for the period fell 1% with productivity benefits and lower restructuring related costs, partly offset by provisions for higher performance-based compensation. The big bank is targeting expense growth in FY21 of 0% to 2%.

Loan book

The bank said at that 31 December 2020, the Australian home loan deferral balance had declined to approximately $2 billion and the Australian business loan deferral balance had declined to approximately $1 billion. These balances are much lower than the peak balances of approximately $38 billion for home loans and approximately $19 billion for business loans.

However, the percentage of loans that are more than 90 days past due and gross impaired assets, compared to gross loans and acceptances, increased by 17 basis points between December 2020 and January 2021 to 1.18%.

Balance sheet

The big four ASX bank disclosed that its group common equity tier 1 (CET1) ratio had increased to 11.7%, compared to 11.5% at 30 September 2020. This includes the benefit of 12 basis points from the foreign currency translation and mark-to-market on its liquids portfolio.

NAB strategy comments

NAB's CEO Ross McEwan spoke about the bank's ongoing strategy:

"Implementation of our strategy is proceeding well as we invest for the long-term and focus on initiatives that make a real difference to our customers and colleagues. While there is still much to do, it is pleasing to see momentum building in our core businesses as we simplify and streamline our processes and policies and enhance our digital offerings."

Initial reaction

Aside from the market's upbeat reaction to the report, sending the NAB share price higher, analysts have also been having their say.

The Australian Financial Review quoted Credit Suisse analyst Jarrod Martin as saying that the NAB result was a clean and solid first quarter trading update and that he expected the market to react positively.

Using the earnings projections on Commsec, the NAB share price is valued at under 20x FY21's estimated earnings and it's valued at 16x FY22's estimated earnings.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares finished the trading week on a high this Friday.

Read more »

A businessman stacks building blocks.
Technology Shares

6% gain! What's up with Block shares today?

Block shares are up more than 34% since 2 May.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why ARB, Block, Mayne Pharma, and Paladin Energy shares are charging higher today

These shares are having a strong finish to the week. But why?

Read more »

A woman puts her hands up as she smashes and breaks through a glass ceiling.
Share Gainers

How these 5 ASX 200 stocks are smashing the benchmark this week

These fives ASX 200 stocks have made some very happy shareholders this week. Here’s how.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

The markets lost their steam this Thursday.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Share Gainers

Why Catapult, Hutchinson, SKS, and West African shares are pushing higher today

These shares are having a strong session despite the market weakness.

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

Up 72% in 2025, why is this ASX 200 gold stock racing ahead of the benchmark again today?

Investors are bidding up this high-flying ASX 200 gold stock again on Thursday. But why?

Read more »

Businessman smiles with arms outstretched after receiving good news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a wonderful Wednesday session for investors today.

Read more »