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Key points
- NAB's first quarter update will be released early next month
- Bell Potter expects a quarterly cash earnings of $1.59 billion
- The broker thinks now is a good time to buy. It has a buy rating and $31.00 price target on its shares
The National Australia Bank Ltd (ASX: NAB) share price will be one to watch next month when it releases its first quarter update.
Ahead of the release, let's take a look to see what the market is expecting from the banking giant.
What should you expect from the NAB Q1 update?
According to a note out of Bell Potter, the broker is expecting NAB to deliver a result largely in line with what was achieved in FY 2021.
Bell Potter is forecasting cash earnings of $1.59 billion and cash earnings per share (EPS) of 49 cents.
It explained: "Back in FY21, cash earnings and cash EPS were $6.56bn and 199¢ and there was no difference to numbers ex-large notable items (i.e. excluding restructuring-related costs and customer-related remediation). On a quarterly basis, these would be around $1.61bn cash earnings and 49¢ cash EPS respectively and would be equivalent to our forecasts of close to $1.59bn cash earnings and around 49¢ cash EPS in 1Q22 (again with no difference to ex-large notable items)."
As for its CET1 ratio, the broker expects this to come in at 12.2% after taking into account the Citi acquisition and its $2.5 billion share buyback. This is still ahead of its target range of 10.75% to 11.25%.
Another positive that Bell Potter is expecting is the bank's credit impairment charge. It expects better credit impairment outcomes overall including ongoing momentum across home lending, SME lending, and New Zealand.
As for its outlook, Bell Potter concluded: "The COVID-19 outlook still calls for calm but the bank remains "optimistic about the long-term outlook for Australia and New Zealand" – something that we can still agree with.
Is the NAB share price in the buy zone?
Bell Potter believes the NAB share price is good value at the current level.
It has retained its buy rating and $31.00 price target. Based on the current NAB share price of $27.65, this implies potential upside of 12% over the next 12 months. In addition, Bell Potter expects a fully franked 4.9% dividend yield in FY 2022, boosting the total potential return to almost 17%.
