NAB Shares Plummet Amid Pessimistic Broker Reports

NAB shares suffered a significant drop after a series of broker reports expressed concern over the bank's financial performance and its ability to meet expectations. The bank's warning of an 8-10% fall in first-half cash earnings added to the pessimism, with analysts questioning whether the problems were one-off or recurring. The market's reaction was marked by a sell-off, with NAB shares falling as low as $29.09 before recovering slightly to finish at $29.64.

Key Takeaways:

• NAB shares fell as low as $29.09 before recovering to finish at $29.64, a 7 cents decline.
• The bank's warning of an 8-10% fall in first-half cash earnings to $1.8 billion sparked concern among analysts.
• Deutsche Bank's Ross Brown and Alliance Capital Management's Neil Margolis expressed skepticism about the bank's ability to resolve its problems, with Margolis stating that "it is a big issue".
• Brokers are split on how the bank will handle the underwriting of its dividend reinvestment plan, with some analysts suggesting that the bank may only issue shares representing half the $1.2 billion dividend payout.
• JP Morgan noted that earnings uncertainty is a key negative for the stock, with operating conditions having deteriorated in a short space of time.
• NAB is yet to complete a strategic review of its operations, which may result in a second-half write-off of up to $1 billion.

Statistics:

• NAB shares fell by 7 cents to finish at $29.64.
• The bank's warning of an 8-10% fall in first-half cash earnings is expected to impact earnings uncertainty.
• $700 million worth of NAB shares changed hands, with offshore selling offset by late buying.
• The bank's total capital ratio may be bolstered by acquiring capital, with some analysts suggesting that the bank may only need to raise half the $1.2 billion dividend payout.

Sources:

• "NAB faces a host of problems including tighter margins in its British and Australian banking operations, adverse currency movements, flow-on losses in its corporate and institutional banking business and higher regulatory and pension costs in Britain." (Source: Deutsche Bank)
• "We don't have all of the information to determine the split between one-off and recurring problems but it is a big issue. The company has not said that they are one-off at this point so it is reasonable to assume that the majority of it is recurring unless the bank discloses otherwise." (Source: Alliance Capital Management)
• "NAB has not said that they are one-off at this point so it is reasonable to assume that the majority of it is recurring unless the bank discloses otherwise." (Source: Neil Margolis, Alliance Capital Management)