Is the National Australia Bank Ltd (ASX: NAB) share price a buy today?
The journey that NAB shareholders have gone on during 2019 is quite different to most other bank shareholders.
A few months ago NAB was singled out for criticism in the royal commission, leading to the announced resignation of both its CEO and Chairman.
But since that low point things are looking up. Both of the top leadership positions are on course to being filled and the surprise federal election win by the Liberals & Nationals and subsequent news from APRA has left bankers and investors feeling jubilant. Less punishment, a lower interest rate buffer from APRA and lower interest rates from the RBA could all be positives.
Many analysts now believe that NAB could be the bank to buy with it trading at under 12x FY20's estimated earnings and a projected grossed-up dividend yield of 9%.
With the NAB share price up 10% since the start of February, I'm going to be a bit contrarian compared to most and say I don't think NAB is great buy today.
A large part of NAB's short-term performance will be the loan book that it has already built. A new CEO cannot change the loans that have already been written. If those loans turn out to be bad ones there's nothing they can do, all they can control is the response and future loans that are written.
We can see that the 90+ day arrears for NAB, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) are rising. Even if Australian house prices stop falling I'm not sure that the affordability of loans will improve for people who are in strife, although three RBA rate cuts this year could make just enough difference.
Foolish takeaway
I'm not a buyer of any of the ASX banks today. At best their profit is likely to be flat over the next two years and at worst could drop materially due to rising bad debts.