Is The NAB (ASX:NAB) Share Price A Buy With Growth In 3Q19?

Could the National Australia Bank Ltd (ASX: NAB) share price be worth buying after reporting growth in its third quarter of 2019?

NAB is one of the four largest financial institutions in Australia in terms of market capitalisation, earnings and customers. However, in 2018, it was Australia’s largest lender to businesses and has operations in wealth management and residential lending. It also operates the online-only Ubank.

NAB Reports Its Third Quarter Of 2019

The major ASX bank reported that compared to the quarterly average of the first half of 2019 and excluding customer-related remediation, cash earnings increased by 1% to $1.65 billion due to revenue increasing 1% and flat costs thanks to its ongoing productivity savings.

NAB revealed that its net interest margin (NIM) increased due to lower short term wholesale funding costs. A higher NIM says that NAB is making more money between what it borrows money compared to the interest on the loans its gives out.

NAB also reported that it achieved an unaudited statutory net profit of $1.7 billion.

These profit numbers were achieved despite a backdrop of a “challenging environment” with low home lending growth.

In terms of its capital ratio, its group common equity tier 1 (CET1) ratio was 10.4% at June 2019, but that doesn’t include $1 billion, or 0.25%, of first half dividend reinvestment plan underwriting proceeds which were received in July.

One of the things that NAB has been working on is being the best business bank in Australia with a focus on being simpler and faster for customers. Since the transformation began there has been a 27% reduction in over the counter transactions and 18% reduction in call centre volumes.

However, if you were thinking that Royal Commission remediation costs at NAB were finished then you may be disappointed later this year. The bank warned that customer remediation programs are ongoing and additional provisions are expected to be recognised in this half.

NAB Asset Quality

NAB’s credit quality update wasn’t so promising. Impairment charges increased 21.7% to $247 million for the quarter compared to the third quarter in 2018.

The big four bank also showed that loans 90+ days past due and gross impaired assets as a percentage of gross loans & acceptances increased to 0.85%. It was 0.79% at March 2019 and 0.72% at December 2018. This isn’t a positive trend!

Is The NAB Share Price A Buy?

Whilst NAB may offer a fully franked dividend yield of 6%, I think the growing late loans are a worrying sign. Until it stops falling I think NAB is becoming riskier rather than safer to invest in.

I’d much rather invest in one of the reliable ASX shares below over NAB at today’s prices.

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.

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