The National Australia Bank Ltd. (ASX: NAB) share price has climbed from $26.80 a month ago to today's price (at the time of writing) of $29.20 – a 9% climb and just off the new 52-week high of $29.26 it hit earlier this morning.
Today's share price also means that NAB shares have now rocketed 23.5% this year (and that's not including NAB's hefty dividend payments). But with the NAB share price at its highest level in 18 months, is this as good as it gets? Let's take a look.
Why does everyone love ASX banks right now?
It's not just NAB that is raising the roof in the ASX banking sector. Westpac Banking Corp (ASX: WBC) shares hit a new 52-week high only yesterday, while the Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) share prices are not too far off their respective highs either.
From where I'm standing, these price moves are likely the result of the resurging property/housing market, on top of improving sentiment for the banks – sentiment that was colossally damaged by last year's Royal Commission, as well as the prospect of the Labor Party winning government in May's election.
As mortgages and property loans are the biggest drivers of the banks' profitability, a broader turning point in the property market – as we are seeing in the Sydney and Melbourne markets in particular – is a significant tailwind for the ASX banks' earnings.
Further, with interest rates now at their lowest levels on record, it's likely that business credit and loan applications have seen an uptick. NAB is the ASX bank most heavily exposed to this sector, so its likely that NAB's books are benefiting more than the mortgage-heavy Westpac or Commonwealth Bank.
Is NAB a buy today?
Even at today's highs, NAB shares are still offering a starting dividend yield of 6.24%, which isn't bad from an income perspective at all. NAB even cut its dividend yield earlier this year, so I don't expect any more cuts in the near future either. However, I don't see any more significant upside in the NAB share price either – it's my view that we are getting close to the top of this momentum swing, and NAB shares are more likely to go down than up going forward. NAB might still be a good buy for income, but don't bank an any capital gains at these levels.
