National Australia Bank Ltd (ASX: NAB) shares are charging higher on Tuesday morning.
At the time of writing, the banking giant's shares are up a decent 1.5% to $28.69.
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Why are NAB shares rising?
Investors have been bidding NAB shares higher today in response to the bank's third-quarter update.
For the three months ended 30 June, NAB reported cash earnings of $1.9 billion. While this represents a 5.8% increase over the prior corresponding period, it is down 5% compared to the first-half quarterly average.
Nevertheless, the market was expecting a slowdown in second-half earnings, so this was not unexpected.
For example, analysts at Goldman Sachs were forecasting NAB's FY 2023 cash earnings to come in at $7,726 million. This implies that the bank's second-half cash earnings will rise only ~1% year over year. So, with NAB delivering a 5.8% increase in the third quarter, it is trending ahead of expectations thus far.
This may explain why NAB shares are having a strong start to the day this morning.
Share buyback
Also giving NAB shares a boost today was news that the bank will shortly embark on a major on-market share buyback.
NAB intends to buy back up to $1.5 billion of its shares as part of a plan to take its CET1 ratio towards the target range of 11.00% to 11.50%. This is from 11.9% currently. NAB expects to commence the buyback in late August.
NAB CEO, Ross McEwan, said:
This decision is consistent with our focus on maintaining a strong balance sheet through the cycle, while progressively reducing our share count over time.
Following today's gain, NAB shares are now down approximately 6% since this time last year.
