It's been a tumultuous ride for National Australia Bank Ltd (ASX: NAB) shareholders over the past decade.
Source: Yahoo! Finance
In fact, if we exclude the benefit of dividends – which are important – an investment in NAB shares 10 years ago would today be worth less. Even the S&P/ASX 200 (index: ^AXJO) (ASX: XJO) has performed better, before dividends are included.
There are varying opinions to explain why NAB shares have significantly underperformed those of their peers.
However, NAB's exposure to both the USA and, more importantly, the UK have long distracted the bank's senior management.
Following on from the Global Finance Crisis in 2008, NAB's exposure to bad UK commercial property loans ballooned. In 2012, NAB integrated some £5.6 billion worth of its Clydesdale bank loans into the main group.
The run-off and sale of the 'CRE' portfolio continued into the 2014 financial year when NAB reduced the portfolio by a further $3.2 billion. After further sell-downs in the first half of 2015, the portfolio was reduced to just £0.6 billion at December 2014.
However, NAB also had 'Specialised Group Assets' outstanding, which amounted to $2.1 billion at December 2014. That was down from the $4.1 billion at the end of FY14.
How safe is your money in NAB?
For shareholders, risks are always present.
And NAB undoubtedly has a patchy record when it comes to being a steward of shareholder capital. However, a revitalised management team with a 'can do' attitude appear now to be tackling the bank's legacy issues both locally and abroad.
The ongoing divestment of Clydesdale Bank to public markets, as well as the recent record-breaking rights issue could finally turn the table in NAB shareholders' favour.
However, against a backdrop of a slowing economy and increased sharemarket volatility I find it difficult to envisage NAB – or its peers – continuing to enjoy the exceptional loan portfolio and profit growth of yesteryear well into the future.
Therefore, I think any investors currently considering an entry into NAB shares should hold off, at least until its annual report is released in November.
