The analyst has estimated that NAB’s profit will rise again this year, forecasting net profit after tax (NPAT) to increase to $6.5 billion, up from last year’s NPAT of $6.2 billion.
Morningstar expects NPAT will return to and exceed pre-royal commission levels in 2020, predicting it will come to $6.9 billion, above the 2017 NPAT of $6.6 billion.
NAB has said it will provide further details of progress made to restoring trust and instilling a customer focused culture when it reports its results for the first half year on 2 May.
Morningstar has also said NAB’s sale of its MLC wealth business, delayed until fiscal 2020, will be an early test for the new chairman and board of directors.
“The next 12 months will be a period of elevated uncertainty for Australia’s fourth largest major bank,” Morningstar said.
“Nonetheless, we view the management and board change as a positive and in the best long-term interest of shareholders.”
Morningstar believes Mike Baird will be picking up the slack as new CEO of the bank, after former boss Andrew Thorburn stepped down alongside former chair Ken Henry.
“We are not surprised with Chronican’s appointment as chairman and we think he will stay in the interim CEO role for most of calendar 2019, before current chief customer officer, consumer banking, Mike Baird is promoted to CEO,” the analysis said.
“We think Baird is the likely successor, with his key weakness being a lack of senior management experience at a large and complex bank like National Australia Bank.”
It also has retained its $30 fair value estimate, saying that at current prices, the bank’s stock is undervalued trading 15 per cent below its valuation.
However, Morningstar added, a slowdown in core earnings growth could resurface as a result of subdued wealth and markets income in addition to slower-than-expected business loan growth, margin compression, slower growth in banking fee income and a worse-than-expected cost outcome.
