Is the National Australia Bank Ltd (ASX: NAB) share price a buy?
The NAB share price is down 1.4% today, but it's still up 4.3% over the course of the week after the release of the Royal Commission.
For NAB as a business entity it didn't seem all that bad. But for NAB's officials it did not make for good reading.
Commissioner Ken Hayne was rather negative about the NAB chairman and CEO in the Royal Commission report.
On p411 he said "NAB also stands apart from the other three major banks. Having heard from both the CEO, Mr Thorburn, and the Chair, Dr Henry, I am not as confident as I would wish to be that the lessons of the past have been learned. More particularly, I was not persuaded that NAB is willing ton accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly.
"I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues. I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS on this account is likely to be more than $100 million. I thought it telling that in the very week that NAB's CEO and Chair were to give evidence before the Commission, one of its staff should be emailing bankers urging them to sell at least five mortgages each before Christmas.
"Overall, my fear – that there may be a wide gap between the public face NAB seeks to show and what it does in practice – remains."
I thought it was useful to include the entire quote for readers who hadn't yet seen it. It's pretty hard reading if you're Mr Thorburn or Dr Henry.
It's truly remarkable that NAB's officials were singled out for criticism by name, it's not a good look for NAB. However, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) were probably as guilty of the same misconduct.
It remains to be seen if Mr Thorburn and Mr Henry are in their respective roles this time next year.
NAB has been refunding customers and seemingly making the necessary changes. Indeed, it was CBA that suffered a temporary ASIC ban for not yet complying with the enforceable undertaking. Perhaps the NAB officials just didn't put on the right PR face, although that is a misjudgement in itself.
Foolish takeaway
NAB has often been the cheapest of the big banks. It's currently trading at under 11x FY19's estimated earnings with a grossed-up dividend yield of 11.5%. It has the biggest dividend yield, so if all the banks can maintain their payouts then NAB would potentially pay the biggest dividend over the next few years.
However, I wouldn't be a buyer of NAB shares until the Australian housing market stops declining – until then there's a big risk of rising bad debts.
