Re: NAB - Ready to go up?
SYDNEY, Nov 10 (Reuters) - Citigroup Investment Research has
downgraded its rating on National Australia Bank Ltd. <NAB.AX> to
"sell" from "hold" and said the stock appeared overpriced and
restructuring benefits would be slower than anticipated.
"While NAB's rate of revenue growth impressed, expense growth
also looks likely to exceed our initial estimates," Citigroup
analysts Craig Williams and Neil Murchie said in a report.
Citigroup, which kept a 12-month share price target of A$31,
added: "Extracting costs will be more difficult and take time."
Shares in Australia's biggest bank, which is cutting jobs as
part of a restructuring plan, were down 2.4 percent at A$32.38 by
10:52 a.m. (2352 GMT) in a broader market 0.16 percent weaker.
Goldman Sachs JBWere also downgraded its long-term rating on
NAB to "hold" from "buy" and cut its earnings forecasts, while
Credit Suisse First Boston favours other banks.
"NAB have chosen to trade nearer term cost leverage for
longer term revenue growth," Goldman Sachs analyst James Freeman
said in a report. "While this decision may benefit the longer
term trajectory, this has resulted in our returns profile being
pushed out, thus leaving medium term valuations challenging."
NAB posted on Wednesday a better-than-expected 2.6 percent
rise in second-half cash earnings per share, which is earnings
before goodwill amortisation and one-off items, but said
moderating economies would pose challenges to business growth.
"Overall, the result confirmed to us our theme of NAB being a
fully priced restructuring story, with NAB's restructuring on
track -- rather than ahead -- to deliver the turnaround story as
expected, rather than something better," Credit Suisse First
Boston analysts Nick Selvaratnam and James Ellis said.
CSFB said there were better risk/reward trade-offs in St
George Bank Ltd. <SGB.AX>, Westpac Banking Corp. <WBC.AX> and
Australia and New Zealand Banking Group Ltd. <ANZ.AX>.
"The key risk to our NAB investment view is the possibility
of a divestment of the UK franchises at any time," Selvaratnam
and Ellis said. They retained a "neutral" rating on NAB.
Goldman Sachs lowered its 2006, 2007 and 2008 diluted cash
earnings per share forecasts by 3.4 percent, 4.1 percent and 2.2
percent, respectively.
UBS raised its 12-month share price target on NAB to A$31.80
from A$30.84 and trimmed its 2006 forecast by 0.5 percent, saying
the biggest caveat on the bank was its "stretched valuation."
"Turnaround appears to be underway, albeit slowly," UBS
analysts Jeff Emmanuel, Jonathan Mott and Ross Curran said in a
report. "Numerous pressure points are holding forecasts down."
($1=A$1.35)
SYDNEY, Nov 10 (Reuters) - Citigroup Investment Research has
downgraded its rating on National Australia Bank Ltd. <NAB.AX> to
"sell" from "hold" and said the stock appeared overpriced and
restructuring benefits would be slower than anticipated.
"While NAB's rate of revenue growth impressed, expense growth
also looks likely to exceed our initial estimates," Citigroup
analysts Craig Williams and Neil Murchie said in a report.
Citigroup, which kept a 12-month share price target of A$31,
added: "Extracting costs will be more difficult and take time."
Shares in Australia's biggest bank, which is cutting jobs as
part of a restructuring plan, were down 2.4 percent at A$32.38 by
10:52 a.m. (2352 GMT) in a broader market 0.16 percent weaker.
Goldman Sachs JBWere also downgraded its long-term rating on
NAB to "hold" from "buy" and cut its earnings forecasts, while
Credit Suisse First Boston favours other banks.
"NAB have chosen to trade nearer term cost leverage for
longer term revenue growth," Goldman Sachs analyst James Freeman
said in a report. "While this decision may benefit the longer
term trajectory, this has resulted in our returns profile being
pushed out, thus leaving medium term valuations challenging."
NAB posted on Wednesday a better-than-expected 2.6 percent
rise in second-half cash earnings per share, which is earnings
before goodwill amortisation and one-off items, but said
moderating economies would pose challenges to business growth.
"Overall, the result confirmed to us our theme of NAB being a
fully priced restructuring story, with NAB's restructuring on
track -- rather than ahead -- to deliver the turnaround story as
expected, rather than something better," Credit Suisse First
Boston analysts Nick Selvaratnam and James Ellis said.
CSFB said there were better risk/reward trade-offs in St
George Bank Ltd. <SGB.AX>, Westpac Banking Corp. <WBC.AX> and
Australia and New Zealand Banking Group Ltd. <ANZ.AX>.
"The key risk to our NAB investment view is the possibility
of a divestment of the UK franchises at any time," Selvaratnam
and Ellis said. They retained a "neutral" rating on NAB.
Goldman Sachs lowered its 2006, 2007 and 2008 diluted cash
earnings per share forecasts by 3.4 percent, 4.1 percent and 2.2
percent, respectively.
UBS raised its 12-month share price target on NAB to A$31.80
from A$30.84 and trimmed its 2006 forecast by 0.5 percent, saying
the biggest caveat on the bank was its "stretched valuation."
"Turnaround appears to be underway, albeit slowly," UBS
analysts Jeff Emmanuel, Jonathan Mott and Ross Curran said in a
report. "Numerous pressure points are holding forecasts down."
($1=A$1.35)