Business SummaryNational Australia Bank Limited (NAB) is a financial services group thatprovides a comprehensive and integrated range of banking and financialservices including wealth management throughout Australia, New Zealand,Asia and United Kingdom.

Business Banking: It provides a range of commercial banking services tobusiness customers, ranging from small businesses to large institutions. Italso provides specialist industry expertise in agribusiness, property,healthcare, natural resources, education and government sectors.

Personal Banking: It provides quality products and services to retail andsmall business customers through a range of distribution channels andbrands including NAB, Homeside, UBank and a variety of broker andmortgage manager brands operated by the Advantedge business.

Wholesale Banking: It has seven key lines of business which operateglobally, including Corporate & Business Sales, Fixed Income, Currenciesand Commodities, Global Capital Markets, Treasury, Asset Servicing,Specialised Finance and the Financial Institutions Group.

NAB Wealth: It provides superannuation, investments, insurance and privatewealth solutions to retail, corporate and institutional clients. NAB Wealthoperates through large networks of retail financial advisers in Australia.

NZ Banking: It comprises the Retail, Business, Agribusiness, Corporate,Private Banking, Wealth, and Insurance franchises in New Zealand, operatingunder the BNZ brand.

UK Banking: It operates under the Clydesdale Bank and Yorkshire Bankbrands. It offers a range of banking services for both personal and businesscustomers through retail branches, business and private banking centers,direct banking and brokers.

NAB UK Commercial Real Estate: NAB UK CRE portfolio business wascreated as a result of UK Banking restructuring where it has transferred themajority of UK Banking's Commercial Real Estate assets from ClydesdaleBank PLC to National Australia Bank Limited.

Latest ResearchOne cannot gaze too long at the sun

NAB’s 1H18 result components are: (1) statutory earnings $2,583m (BP$2,571m); (2) cash earnings $2,759m (BP $2,541m), $3,289m excludingrestructuring costs; (3) cash

EPS 102cps (BP 94cps); (4) fully franked interim dividend 99cps (BP99cps), payout 97% on cash earnings basis or 81% excluding restructuringcosts; (5) cash ROE 11.4% (BP 10.5%); (6) Group NIM 1.87% (BP 1.85%);(7) credit impairment charge $373m/13bp GLA (BP $402m/14bp); (8) costto income ratio 52% (BP 54%); and (9)

CET1 capital ratio 10.2% (BP 10.1%).

As expected, NAB’s 1H18 result was impacted by noise from itsinvestment spend of $135m (~9% of the proposed $1.5bn total) andrestructuring costs of $755m (top end of management’s $0.5-0.8bnestimate as alluded to in its 20 April update). While cash

NPAT was 16% pcp lower at ~$2.76bn (-18% hoh) due to the above items,the figure excluding restructuring costs was a more respectable ~$3.29bn

GICS - Banks

National Australia Bank Limited

ASX Code: NAB Price: $27.03 12 Mth Target Price: $29.00 Rating: Hold

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

5 July 2018$73,601m2,723.0m$32.98$26.61

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Hold$29.005.9%10.3%16.2%

Investment FundamentalsFYE 30 Sep 2017A 2018F 2019F 2020F

Profit $m 6,642.0 5,897.3 6,771.7 7,109.4Profit (norm)* $m 6,642.0 5,897.3 6,771.7 7,109.4

EPS* ¢ 249.3 217.6 246.9 256.5EPS Growth % 1.7 -12.7 13.4 3.9P/E* x 11.0 12.6 11.1 10.7P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 197.5 197.5 197.5 197.5Yield % 7.2 7.2 7.2 7.2Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

(unchanged pcp, -2% hoh). Further excluding the investment spend wouldresult in operating expenses of ~$3.85bn (unchanged since 2H17) andnotional cash NPAT of ~$3.41bn, implying an even more respectablegrowth outcomes of ~3% pcp and ~2% hoh. NAB also intends to exit itsAdvice, Platform & Superannuation and Asset Management businessesunder the MLC brand. Separation is planned by the end of calendar year2019 via

demerger, IPO or trade sale. CET1 upside and potential capital release willdepend upon the selected option but ROE should improve by 40-50bp as aresult.

For more information see research 04 May 2018.

GICS - Banks

National Australia Bank Limited

ASX Code: NAB Price: $27.03 12 Mth Target Price: $29.00 Rating: Hold

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

5 July 2018$73,601m2,723.0m$32.98$26.61

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Hold$29.005.9%10.3%16.2%

Investment FundamentalsFYE 30 Sep 2017A 2018F 2019F 2020F

Profit $m 6,642.0 5,897.3 6,771.7 7,109.4Profit (norm)* $m 6,642.0 5,897.3 6,771.7 7,109.4

EPS* ¢ 249.3 217.6 246.9 256.5EPS Growth % 1.7 -12.7 13.4 3.9P/E* x 11.0 12.6 11.1 10.7P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 197.5 197.5 197.5 197.5Yield % 7.2 7.2 7.2 7.2Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2013A 2014A 2015A 2016A 2017A

Net Interest Income 13,351 13,739 13,982 12,930 13,182Provision for Doubt. Debts -1,810 -855 -844 -813 -824Non Interest Income 17,495 14,562 13,231 5,192 4,842Total Operating Income 29,036 27,446 26,369 17,309 17,200Non Interest Expense -20,351 -19,602 -17,810 -8,351 -8,055Profit Before Tax 8,685 7,844 8,559 8,958 9,145Income Tax -2,741 -2,657 -2,717 -2,553 -2,480Outside Equity Int. -8 -3 -54 -5 -3Profit after Tax 5,936 5,184 5,788 6,400 6,662Significant Items after Tax -484 111 521 20 -484Reported Profit after Tax 5,452 5,295 6,338 352 5,285Preferred Dividends -27 -192 -175 -124 -98

Cash Flow ($M)2013A 2014A 2015A 2016A 2017A

Interest Received 31,254 30,369 30,703 28,338 27,176Interest Paid -18,326 -17,146 -17,008 -15,592 -14,315Net Operating Cashflow 1,164 -7,235 -13,090 16,195 13,217Capex -1,232 -1,243 -976 -875 -1,028Acquisitions & Investments -26,569 -29,871 -25,207 -22,086 -23,396Sale of Invest. & Subsid. 24,958 23,816 24,129 24,719 24,060Net Investing Cashflow -2,739 -7,042 -1,830 -9,970 -313Proceeds from Issues 20 9 6,246 -- --Dividends Paid -3,493 -3,973 -3,624 -4,593 -4,750Net Financing Cashflow -1,322 550 1,326 7,761 -331Net Increase Cash -2,897 -13,727 -13,594 13,986 12,573Cash at Beginning 36,212 37,341 26,517 20,528 27,960Exchange Rate Adjust. 4,026 2,903 7,605 -6,554 -733Cash at End 37,341 26,517 20,528 27,960 39,800

Ratios and Substantial Shareholders

Profitability RatiosNet Interest Margin % 2.09 1.99 1.91 1.86 1.81Interest Spread % 1.82 1.75 1.65 1.64 1.60Non-Int Inc/Total Inc % 60.25 53.06 50.18 30.00 28.15Tot Op. Inc/Tot Assets % 3.59 3.11 2.76 2.23 2.18Return on Equity % 12.75 10.83 10.44 12.48 12.99

Efficiency/Safety RatiosCost to Income % 64.91 67.86 63.90 44.17 42.31Capital Adequacy Ratio % 11.80 12.16 14.15 14.14 14.58

Top 5 Substantial ShareholdersBlackRock Group 5.5%

Balance Sheet ($M)2013A 2014A 2015A 2016A 2017A

Cash 35,666 6,849 7,642 2,411 3,060Due from Other Banks 43,193 39,088 50,595 45,236 37,066Trading Securities 149,267 209,190 141,114 136,375 149,823Loans and Advances 411,979 434,725 532,784 510,045 540,125Customer Acceptances 29,319 23,437 19,437 12,205 6,786Total PP&E 1,993 1,952 1,741 1,423 1,315Other Non Earning Assets 137,010 168,060 201,739 69,927 50,150TOTAL ASSETS 808,427 883,301 955,052 777,622 788,325Deposits 445,572 458,647 459,128 459,714 462,072Due to Other Banks 34,623 45,204 54,405 43,903 36,683Bonds & Notes 140,097 169,385 196,738 167,414 199,221Bank Acceptances 3,228 61 -- -- --Provisions 2,558 3,643 4,689 1,729 2,191Other Liabilities 135,729 158,453 184,579 53,547 36,841Total Liabilities 761,807 835,393 899,539 726,307 737,008Net Assets 46,620 47,908 55,513 51,315 51,317Share Capital 28,139 28,380 34,651 34,285 34,627Reserves -1,420 -866 -362 629 237Retained Earnings 19,842 20,377 21,205 16,378 16,442Minorities 59 17 19 23 11TOTAL S/H EQUITY 46,620 47,908 55,513 51,315 51,317

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Mrs Louise R ThomsonMs Penelope (Penny) MacRae

Directors

Mr Philip Wayne Chronican(Non-Executive Director)Ms Ann Sherry(Non-Executive Director)Mr Andrew Thorburn(Chief Executive Officer,Managing Director)Ms Anne Joan Loveridge(Non-Executive Director)Ms Geraldine Celia McBride(Non-Executive Director)Mr Peeyush Gupta(Non-Executive Director)Mr Anthony Kwan Tao Yuen(Non-Executive Director)Dr Kenneth Ross Henry(Non-Executive Director,Non-ExecutiveChairman)Mr Douglas Alexander McKay(Non-Executive Director)Mr David Hugh Armstrong(Non-Executive Director)

To access further Research or for information regarding our recommendations and ratings please seewww.bellpotter.com.au

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liabilityfor its use or distribution. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries ofMorningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. You should consider theadvice in light of these matters and if applicable, the relevant Product Disclosure Statement (Australian products) or Investment Statement (New Zealand products) before making any decision to invest. Ourpublications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's futureperformance. To obtain advice tailored to your situation, contact a professional financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO").

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