Is the National Australia Bank Ltd (ASX: NAB) share price a buy?
Some market commentators now believe that NAB is now the dark horse compared to the other big four banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ).
NAB is trading at 11x FY19's estimated earnings, putting it at a sizeable discount to its peers. For example, CBA is trading at 13.5x FY19's estimated earnings.
Perhaps NAB has rightly traded at a discount for quite a while. Its USA and UK operations didn't go as planned and its Australian loan book may not have been as good as Commonwealth Bank's or perhaps Westpac's.
But, NAB interim CEO and new Chairman Philip Chronican is seen as a steady pair of hands as he was, according to NAB, previously responsible for ANZ Bank's Australia division, with specific responsibility for ANZ's Retail and Commercial businesses. Prior to joining ANZ, he had a long career at Westpac in executive roles including Group Executive Westpac Institutional Bank and Chief Financial Officer.
A key difference why NAB could be the best bank to own, apart from its leading grossed-up dividend yield of 11.2%, is that the bank is going to focus more on business lending.
I think this is a smart idea considering the residential housing market is consistently dropping by more than 0.5% per month at the moment. If this decline doesn't stop soon it might start damaging the bank's loan books. The less exposure the better.
But, it's not like the entire Australian economy is facing sluggish growth. Afterpay Touch Group Ltd (ASX: APT) is rapidly becoming a powerhouse in the Australian financial world and REA Group Limited (ASX: REA) wants to become a major player in the mortgage space. NAB works closely with these two industry leaders.
Australian business should continue to be a good place to focus over the long-term.
Foolish takeaway
At this stage I think NAB could well be the best bank to own. I wouldn't want a lot of exposure to the Australian housing market and if all the banks are going to maintain their dividends then you may as well consider the cheapest one with the biggest dividend yield, being NAB.
