0 Download13 Pages / 3,195 Words
Add in library
Click this icon and make it bookmark in your library to refer it later.
GOT IT
The study will be based on the financial analysis of the National Australian Bank. The analysis of the financial performance will be carried on for National Australian Bank to understanding the movement in the share prices and provide the readers with the appropriate recommendations regarding the viability of making an investment in the stocks. A comprehensive evaluation of the financial performance will be performed which also accompany the shareholding structures and people that are involved in the corporate governance of the National Australian Bank.
Fundamental ratios will be calculated to for the past two years and movement along the graphs relating to the all ordinary index will be carried out to understanding the nature of movement in shares. The report would also look into the macroeconomic factors that creates an influence on the share prices of National Australian Bank. To further understand the capital structure of the company the CAPM model will be employed to derive the weighted average cost of capital that would be used as the base in choosing the rationale involved in making investment. The debt ratio and the dividend policy structure will be studied and a letter of recommendations would be accompanying relevant information for making an investment in National Australian Bank shares.
National Australian Bank is regarded one four largest institutions in Australia based on the market capitalisation, customers base and earnings. National Australian Bank was placed as 21st largest bank in world based on the measured market capitalisation (Nab.com.au 2018). National Australian Bank is ranked 41st based on the total asset measured during the year 2014. As of November 2017 National Australian Bank operates around 1590 branches and services with approximately 4,412 ATM throughout Australia, New Zealand and Asian serving 12.7 million customers. National Australian Bank was created as the National Commercial Banking Corporation of Australia Ltd during the year 1982 upon the merger of National Bank of Australasia and the Commercial Banking Company of Sydney. As a result this, the bank was subsequently renamed as the National Australian Bank Ltd.
The bank witnessed the period of quick expansion as National Australian Bank bought several bank through acquisition with the acquisition of Home Side Lending which was one of the leading US based mortgage originator and service provider having base in Florida (Nab.com.au 2018). National Australian Bank launched during the year 2008 launched a brachless direct banking and traded separately as the U-Bank under the leadership of the Greg Sutherland and Gerd Schenket. The National Australian Bank during the year 2009 commenced a strategy of reputation change, management of wealth and placed larger emphasis on the domestic markets.
As of 31st October 2017, the Black Rock Group along with its associated companies formed the substantial shareholders of National Australian Bank. The Black Rock Group held more than 147,042,052 fully paid ordinary shares in the National Australian Bank that accounted for 10.23% of the total ordinary shares (Nab.com.au 2018). Based on the information it can be stated that National Australian Bank is a non-family based company.
The other largest shareholders of the National Australian Bank is stated below;
|
Name of the Shareholders |
Total Number of Shares |
Percentage of Shares Held |
|
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED) |
638,988,106 |
23.79% |
|
J P MORGAN NOMINEES AUSTRALIA LIMITED |
319,495,521 |
11.90% |
|
CITICORP NOMINEES PTY LIMITED |
155,591,328 |
5.79% |
Based on the above stated shareholders information it can be stated that only one shareholder which is HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED) formed the largest shareholders of National Australian Bank as the HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED) held more than 20% of the shares of National Australian Bank (Nab.com.au 2018). There were only two shareholders that more than 5% of the total ordinary shares of National Australian Bank. This included the J P MORGAN NOMINEES AUSTRALIA LIMITED and the CITICORP NOMINEES PTY LIMITED with each holding 11.90% and 5.79% of the total number of shares. Based on the above shareholder classification an argument can be bought forward by stating that the National Australian Bank is non-family company with substantial portion of the shareholdings being held by Black Rock Group and its associates.
The main people that are involved in the National Australian Bank governance are stated below;
|
Name |
Total No. Of Fully Paid Ordinary Shares |
|
KR Henry (Chairman |
10,360 |
|
DH Armstrong |
10,480 |
|
PW Chronican |
31,000 |
|
PK Gupta |
7,480 |
|
AJ Loveridge |
10,000 |
|
GC McBride |
5,960 |
|
DA McKay |
10,000 |
|
AC Sherry |
7,831 |
|
AG Thorburn |
1,65,124 |
|
AKT Yuen |
12,464 |
|
Senior executives |
|
|
MB Baird |
2,000 |
|
AJ Cahill |
32,957 |
|
SJ Cook |
2,000 |
|
AD Gall |
93,269 |
|
AP Hagger |
27,976 |
|
AJ Healy |
44,642 |
|
GA Lennon |
53,765 |
|
A Mentis |
50,264 |
|
LN Murphy |
34,072 |
|
PF Wright |
2,000 |
As evident from the above stated tabular representation it can be stated that none of the directors and the senior had more than 5% of the share holdings (Nab.com.au 2018). Therefore, an argument bought forward by stating that there no such presence of family members in the corporate governance of National Australian Bank.
Table 1: Table Representing Solvency Ratios
(Source: As Created by Author)
Table 2: Table Representing Long Term Solvency Ratios
(Source: As Created by Author)
Table 3: Table Representing Asset Utilization Ratios
(Source: As Created by Author)
Table 4: Table Representing Profitability Ratios
(Source: As Created by Author)
Table 5: Table Representing Market Value Ratios
(Source: As Created by Author)
(Source: As Created by Author)
As evident from the graphical representation it can be stated that the share price of the company has been relatively moderate with certain occasions of volatility being noticed. As understood the share price of the National Australian Bank has been in accordance with the all ordinary index (Gibbs et al. 2018). There have been instances during the month of December 2015 where the share price of National Australian Bank declined to stand at -8.41% while in the subsequent month of January 2016 the share price movement of National Australian Bank reflects further decline and stood negatively at -9.36.
Nevertheless, in the following month of February National Australian Bank posted a positive rise of 8.47 from the previous recorded downfall during the month of January (Radi? et al. 2018). It can be stated the three was very less volatility in the share price movement of National Australian Bank against the all ordinary index throughout the year of 2016 with share prices of the bank rising as high as 4.36% during the month of June 2016 (Simply Wall St 2018). Preceding to the following year of 2017 National Australian Bank reported a strong rise in the price of shares to stand positively at 5.47% while the all ordinary index stood 1.52%.
A significant decline in the share price was noticed during the month of April in 2017 when the prices of shares fell as low as -11.41 against the negatively standing all ordinary index of -3.17% (Alvesson and Robertson 2016). The financial year of 2017 reflects that the share prices of the National Australian Bank on certain occasion reported a negative decline against the all ordinary index. The year 2017 has witnessed a medium volatility in the share prices compared to the figures reported against the all ordinary index. Overall it can be stated on observing the share price movement of the National Australian Bank that there is an existence of moderate volatility in share price of the bank.
There are certain factors that creates an impact on the share prices of the National Australian Bank. The “Macroeconomic factors” includes the economic demand for loans. The economic growth creates the demand for the loans and creates an impact on the ability of the borrower to repay that directly impacts the share prices and the higher level of risk undertaken by the National Australian Bank (Iannotta 2014). Following the consequences of the global financial crisis tighter lending practices by the National Australian Bank has resulted in more conservative lending’s. The macroeconomic factors suggest that the credit creation is going strong in Australia at a rate of 2.5% of the GDP. As a result this creates an influence in the share prices of the National Australian Bank.
Another factor that create an influence in the share price of the National Australian Bank is the “changes in the company focus”. This includes an increased focus on the domestic mortgage market since the company has the reputation of working with the business (Wójcik, Knight and Pažitka 2017). The investors may opt for making an investment in the shares of National Australian Bank is primarily because of the rapidly growing business in Australia.
The “industry wide factors” include the National Australian Bank relation with the REA Group Ltd relating to the mortgage decision (Scott 2015). National Australian Bank has also created a relation with the Afterpay Touch Group Ltd that is generating large amount of growth in Australian and presently expanding in the foreign nations (Au.finance.yahoo.com 2018). The large number of the success of the National Australian Bank is reliant on the Australian economy and the housing market.
The changes in the “management earnings forecast” also forms an important factor that create an influence in the share price of the National Australian Bank (Robson, Young and Power 2017). With stabilization in the loan funding costs and intensifying of the competition in the market of home loan the Chief executive of the National Australian Bank in his suggestion stated that he would cut down the rates of mortgage to synchronize with the central bank when the time appears to be appropriate. This resulted in 25 basis point fall in the share prices of National Australian Bank.
The calculated beta of the National Australian Bank stands 1.20.
(Source: As Created by Author)
Concerning the conservative of making an investment in the shares of National Australian Bank it can be stated that the share prices of the National Australian Bank is lower than then was a year before (Macve 2015). The share prices of the National Australian Bank is presently 1 year low and with dividend yield of around 6.7% and the price earnings ratio of 13.4, the National Australian Bank is regarded as the best buy out among the Australian banks. The inevitable rise in the rates of the reserve bank of Australian would increase the National Australian Bank earnings and loans (Barillas and Shanken 2018). The rationale for making a conservative investment in the shares of National Australian Bank is that the share prices is below future cash flow value but not below the moderate discount of 20% and not below the substantial discount of 40%.
The National Australian Bank is regarded as the good value in terms of the earnings in comparison to the Australian market (Zabarankin, Pavlikov and Uryasev 2014). Additionally the earnings of the National Australian Bank has witnessed growth and it is anticipated to the go further than the low risk savings rate of 4.6%. Over the period of five years the National Australian Bank the annual earnings growth has been positive (Maynard 2017). Furthermore, the National Australian Bank has utilized its asset efficiently than the Australian banking industry with better return on assets. Therefore, the banks has low risk of dividend at the risk saving rate of 2.48% and the dividend of National Australian Bank is currently top among the market players.
Table 7: Representing Weighted Average Cost of Capital for National Australian Bank
(Source: As Created by Author)
When it is noticed that the WACC is on the higher side then there prevails a sign of greater risk associated to the functional operations of the organization (Warren and Jones 2018). Generally investors require higher amount of return to believe the existence of added sum of risks. The weighted average cost of capital turns out to be an important instrument in ascertaining the anticipated costs that is involved in the financing of the overall resources (Martin and Roychowdhury 2015). This generally comprises of the imbursement of a sum associated to the obligations of the debt or alternatively the costs that originates from the debt financing and the required rate of return that is obligatory in management ownership or cost associated in equity financing.
A large number of the listed companies usually has numerous funding sources. The WACC aims to strike balance in the relative costs of several resources so that a single cost of capital figure is generated (Hoyle, J.B., Schaefer and Doupnik 2015). In usual theory the weighted average cost of capital comprises of the expenditure engaged in raising an additional amount of money. Investors may voice their distress on finding that the WACC is on the higher side of the actual return (Barberis et al. 2015). This results in warning sign a firm may be losing out its worth. As a result the investors may not choose to invest when they find that a higher return is available in the somewhere else in the market.
The debt ratio of National Australian Bank for both the financial year of 2016 and 2017 stood stable at 0.93. The management of the National Australian Bank believes that would be able to repay its debts (Henderson et al. 2015). The management to adjust its adjust the gearing ratio bought a change in the capital structure was reported by National Australian Bank as the bank transitioned to the revised level 2 group structure that created an immediate effect on the capital position of the company (Jegadeesh et al. 2016). The remaining amount of the debt originating from the debt issued directly by the national wealth management holdings were not any required.
The directors of National Australian Bank have declared a final dividend that stood 99 cents per share fully paid on the ordinary shares with 100% franked. The dividend policy of National Australian Bank states the company each year adjusts its dividend reinvestment plan to reflect the position of capital and outlook (Lee. and Parker 2014). The National Australian Bank offers its shareholders with 1.5 discount on the dividend reinvestment plan with no limit in participation.
To ABC
Adelaide, Australia
Respected Sir,
As evident from the above stated analysis we would like to draw your attention towards our letter that would be providing the recommendations for making investment in the shares of National Australian Bank. The present share price of the National Australian Bank is presently trading below the future cash flow but the share prices are not below the moderate discount of 20%. National Australian Bank is viewed as the better prospect of investment based on the earnings in comparison to the other Australian bank as the earnings of the bank is anticipated to go beyond the low risk savings rate of 2.48%.
The dividend paid by the National Australian Bank is presently at top in comparison to the other dividend payers in the market. A rise in the income of 6.93% is anticipated in the following year. Though the dividends per share have been on the volatile side over the last five years but simultaneously the dividend per share of National Australian Bank has increase in the last five years. The dividends paid by National Australian Bank is presently covered by its net profit.
Additionally, the bank has liabilities that are made up of lower risk funding sources with loans of the National Australian Bank is widely funded by the customer deposits. The level of assets for National Australian Bank comparatively moderate in respect to its equity. Bearing the mid the dividend that is paid by National Australian Bank, it is good prospect of making an investment.
We anticipate the recommendations provided have helped in better understanding of investment prospect in National Australian Bank.
Thank You
A conclusion can be drawn by stating that share prices of the National Australian Bank is currently trading a below one year low but the bank is believed to have strong cash flow to meet its debts. From the perspective of investors the shares of bank is a good buy since it provides good value of earnings in the Australian market. The earnings growth though appears to be not above the Australian banking market average but it is in positive track and with low risk of savings rate the shares of the National Australian Bank is currently the good buy for the investors.
Alvesson, M. and Robertson, M., 2016. Money matters: teflonic identity manoeuvring in the investment banking sector. Organization Studies, 37(1), pp.7-34.
Au.finance.yahoo.com. (2018). NAB.AX: Summary for NAT. BANK FPO - Yahoo Finance.
Barberis, N., Greenwood, R., Jin, L. and Shleifer, A., 2015. X-CAPM: An extrapolative capital asset pricing model. Journal of financial economics, 115(1), pp.1-24.
Barillas, F. and Shanken, J., 2018. Comparing asset pricing models. The Journal of Finance, 73(2), pp.715-754.
Editorial, R. (2018). ${Instrument_CompanyName} ${Instrument_Ric} Chart| Reuters.com.
Gibbs, M., Goyder, R., Kahl, C. and Rosen, B.J., 2018. Computationally Expensive Problems in Investment Banking. In High-Performance Computing in Finance (pp. 25-46). Chapman and Hall/CRC.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Iannotta, G., 2014. Investment banking. Springer.
Jegadeesh, N., Noh, J., Pukthuanthong, K., Roll, R. and Wang, J.L., 2017. Empirical tests of asset pricing models with individual assets: Resolving the errors-in-variables bias in risk premium estimation.
Lee, T.A. and Parker, R.H. eds., 2014. Evolution of Corporate Financial Reporting (RLE Accounting). Routledge.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.
Martin, X. and Roychowdhury, S., 2015. Do financial market developments influence accounting practices? Credit default swaps and borrowers? reporting conservatism. Journal of Accounting and Economics, 59(1), pp.80-104.
Maynard, J., 2017. Financial Accounting, Reporting, and Analysis. Oxford University Press.
Nab.com.au. (2018). Annual reports.
Radi?, N., Fiordelisi, F., Girardone, C. and Degl’Innocenti, M., 2018. Competition and Risk-Taking in Investment banking(No. 21268). University of Essex, Essex Business School.
Robson, K., Young, J. and Power, M., 2017. Themed section on financial accounting as social and organizational practice: exploring the work of financial reporting. Accounting, Organizations and Society, 56, pp.35-37.
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Simply Wall St. (2018). National Australia Bank (ASX:NAB) - Share price, News & Analysis.
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Wójcik, D., Knight, E. and Pažitka, V., 2017. What turns cities into international financial centres? Analysis of cross-border investment banking 2000–2014. Journal of Economic Geography.
Zabarankin, M., Pavlikov, K. and Uryasev, S., 2014. Capital asset pricing model (CAPM) with drawdown measure. European Journal of Operational Research, 234(2), pp.508-517.
To View this & another 50000+ free samples. Please put your valid email id.
Earn back the money you have spent on the downloaded sample by uploading a unique assignment/study material/research material you have. After we assess the authenticity of the uploaded content, you will get 100% money back in your wallet within 7 days.
Upload
Unique Document
Document
Under Evaluation
Get Money
into Your Wallet
Total 13 pages, 1 USD Per Page
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2020). Finance For Business. Retrieved from https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/the-financial-performance.html.
"Finance For Business." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/the-financial-performance.html.
My Assignment Help (2020) Finance For Business [Online]. Available from: https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/the-financial-performance.html
[Accessed 01 December 2020].
My Assignment Help. 'Finance For Business' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/the-financial-performance.html> accessed 01 December 2020.
My Assignment Help. Finance For Business [Internet]. My Assignment Help. 2020 [cited 01 December 2020]. Available from: https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/the-financial-performance.html.
Getting nightmare regarding pending chemistry assignment? Then it is high time you consider hiring chemistry assignment help service of MyAssigemnthelp.com. We at MyAssignmenthelp.com deliver quality subject specific assistance on more than 100+ subjects. For us, students' need is foremost, and we work round the clock to offer science, humanities and commerce assignment help. Among Commerce wing, our one of the most popular services is capital budgeting assignment help. In science segment, we have gained popularity with biology assignment help.
Answer: The Company’s strategy is to focus on growing markets where it can leverage on its expertise in Analog and Digital signalling process to solve complex problems. (Annual Report Cirrus Logic, 2017, p 3) Suggestion : Strategy should be more specific. It is suggested that strategy should clearly state that the company plans to achieve a minimum growth rate of 32 % and 17 % (This is based on an increase in sales and net income of F.Y...
Read More
Answer: McPherson’s limited is the Australian based company, which is engaged in the products related with the household goods, beauty, and personal care products. The company set up its operation in Australia, New Zealand and Asia (Annual report of McPherson, 2018). Further, the company finances its operations from the internal sources such as retained earnings as well as from the external sources such as by issue of shares, debt and so...
Read More
Answer: Goals of an organization As the manager of an ABC Limited company, the goal has defined in context of shareholders. ABC Limited is retail organization situated in Queensland, Australia. The major goal of the company is to provide the satisfactory return to the shareholders. It can be achieved through focusing on the areas that lead to increase the revenue and decrease the overall cost. The demands of customers are met on time so that ...
Read More
Answer: Introduction Banking industry in Australia is relatively a competitive sector being dominated by several financial institutions including the ANZ, Westpac, NAB, the Bank of Queensland and Commonwealth Bank among others. To manage these banks, the industry is concentrated by the international standards. The share of the banking industry owned by the four banks is higher compared to equivalent shares in the other jurisdictions. Concentr...
Read More
Answer: Title for Dissertation Identifying the factors that affect the financial sustainability in the emerging countries of Asia Variables Selected for the research Study Dependent Variable Financial Sustainability Independent Variable Internal Factors Interest Rate Political Stability Quality of education Infrastructure (Loannou & Serafeim, 2017) Moderator Government rules and regulations Mediator Variabl...
Read More
Just share requirement and get customized Solution.
Orders
Overall Rating
Experts
Our writers make sure that all orders are submitted, prior to the deadline.
Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.
Feel free to contact our assignment writing services any time via phone, email or live chat. If you are unable to calculate word count online, ask our customer executives.
Our writers can provide you professional writing assistance on any subject at any level.
Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.
647 Order Completed
98% Response Time
285 Order Completed
99% Response Time
203 Order Completed
97% Response Time
Get all your documents checked for plagiarism or duplicacy with us.
Get different kinds of essays typed in minutes with clicks.
Calculate your semester grades and cumulative GPa with our GPA Calculator.
Balance any chemical equation in minutes just by entering the formula.
Calculate the number of words and number of pages of all your academic documents.
Our Mission Client Satisfaction
Phenomenal service and very quick in terms of their response/action. Yet to be graded. But, after having a read through, can confirm their quick response did not compromise quality. Will definitely be in touch again with MyAssignmentHelp on future pr...
Australia
great service, they really helped me with a good price I will definitely use this cite till I graduate
Australia
Very nice answers. All of the questions were well answered and allowed me to understand the subject very well.
Australia
The quality of work is excellent! Since I have so many assignments to do, I am scared of late submission. They give me back the work on the same day. High efficiency.
Australia
