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National Australia Bank is outshining its major rivals today after JP Morgan analyst Andrew Triggs named the lender his clear top pick of the Big Four.
NAB shares were up 1.6 per cent at $28.16 this afternoon and trading well ahead of the Commonwealth Bank, Westpac, and ANZ after JP Morgan lifted the stock to overweight in a post-results season shuffle.
JP Morgan’s new pecking order in its banking coverage is Macquarie Group, NAB, and Bank of Queensland - all of which are rated overweight - while ANZ, Westpac, Bendigo Bank and Commonwealth Bank follow, each with neutral ratings.
JP Morgan’s analyst says NAB is the pick of the banksCredit:Bloomberg
ANZ was actually downgraded to neutral based on analyst concerns over the bank’s struggles in the Australian mortgage market.
July APRA stats showed that ANZ’s loan growth trends worsened in the month, and mortgage loans have fallen at a negative 1 per cent annualised pace this half to date, compared to NAB and Westpac at 8 per cent growth.
“(We) think the turnaround will be more protracted than we first thought,” Mr Triggs said of ANZ.
“When combined with the pushback of rate rises by the (Reserve Bank of New Zealand) due to the NZ COVID-19 outbreak, we struggle to see the near term catalysts to re-rate the stock despite valuation support.“
That said, ANZ shares were still up 0.3 per cent at $27.93 on the ASX this afternoon.
In contrast, JP Morgan says NAB is well-positioned to drive top-line growth with strong net promoter scores in both Australian consumer and business.
The threat of AUSTRAC punishment remains a risk for NAB - with the financial crimes watchdog currently investigating potential serious and systemic failures - but JP Morgan says it has already allowed for cost pressures (although not a penalty).
“We have long thought that NAB offers more stable margin trends than peers, given less mortgage headwinds and a positive outlook for small-to-medium-enterprise (SME),” Mr Triggs said.
“This remains the case, and is now being bolstered by ongoing market share gains in mortgages and business lending. Prolonged lockdowns may impact SME asset quality but provisions look solid.“
JP Morgan has a $27.73 price target on NAB.