why i bought nab, page-20

re: why i bought nab - livas Hi Copydog,

2 responses to your observations:

1)
A 60c dividend would equate to a $1.0B profit reduction YoY. That suggests a major corporate going under. If that were to occur, its equally as likely, or more than likely, to be another of the banks rather than the National. Despite this, it is quite possible for profit to drop by $1.0B or more due to non-cash writedowns such as on capitalised software, goodwill write-offs, etc. This may well be on the cards (especially in the software area). But such write-downs do not automatically translate to reduced dividends. This typically only occurs when a cash loss /hit is taken to the P&L. So, which major corporate is going under?

2)
A loss altogether would require a $4.0B-5.0B loss to be recorded. This afterall is what the NAB's cash earnings equate to on a pre-tax basis. Such a loss, for it to occur, would signal systemic meltdown in the corporate sector. Forget the banking sector. The corporate sector would all but collapse. Now, once again, both the CBA and the ANZ are more exposed than the NAB in both the personal home lending and SME sectors, both of which would like return stressed operating conditions before the corporate sector does.

Sometimes the contributions to this debate really does not factor in the consequences of the statements being made. We need to think things through when making such statements, as the scenarios you are presenting would reflect Australia-wide meltdown. Not simply NAB isolated conditioning. That's why I disagree with so much of the sentiment being expressed here. Its not been thought through, or alternatively, it is flawed because it is premised on the circumstances being isolated to the NAB only which is not going to be the case.