Is the NAB share price a buy?

Is the National Australia Bank Ltd (ASX:NAB) share price a buy?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is the National Australia Bank Ltd (ASX: NAB) share price a buy?

Over the past month the NAB share price has dropped by 10%, so does that mean that it's 10% better value?

During that that time the bank has released its full year result which didn't hugely impress.

NAB's cash earnings fell 10.6% to $5.1 billion and statutory profit dropped by 13.6% to $4.8 billion. However, there was one part of the result which was decent – cash earnings excluding large notable items rose 0.8%, but that excludes $1.1 billion of customer remediation and a $348 million capitalised software policy change.

The profit rise suggests that NAB's 'underlying' profit improved slightly during FY19 and suggests things may be getting better for the bank. However, some of the metrics didn't actually go in the right direction.

The net interest margin (NIM) worsened by 0.07% to 1.78%, credit impairment charges increased by 18% to $919 million and the ratio of loans 90+ days past due and grossed impaired assets to gross loans and acceptances increased 0.22% to 0.93% mostly because of rising Australian mortgage delinquencies.

For a lot of shareholders the most painful part of the report may have been the 16% cut of the total FY19 dividend to $1.66. The yield is still high, just not as high as it was.

Last week the bank announced it had settled a class action brought against NAB in relation to consumer credit which caused another $49.5 million to go up in smoke.

But in the release of its full annual report, the bank warned that it may be involved in a breach or alleged breach of laws governing bribery, corruption and financial crime.

NAB said it has reported a number of serious breaches of anti-money-laundering and counter-terrorism financing laws (AML/CTF). Commonwealth Bank of Australia (ASX: CBA) has already received a $700 million fine for not reporting to AUSTRAC correctly and look at all the trouble facing Westpac Banking Corp (ASX: WBC).

Foolish takeaway

NAB is trading at 12x FY21's estimated earnings with a grossed-up dividend yield of 9%. There's a lot of uncertainty for NAB in the short-term in the long-term, I wouldn't want to buy shares because of what may happen over the next 12 months.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Bank Shares

Here's when Westpac says the RBA will now cut interest rates

The RBA surprised everyone by keeping rates on hold last week. So, when will the next cut happen?

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Bank Shares

This is the ASX bank stock with the largest dividend yield right now

Looking to ASX bank stocks for dividend income right now?

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Bank Shares

ASX banking sector: Is it time to consider a regional bank?

The big 4 banks are widely considered to be overvalued.

Read more »

A person leans over to whisper a secret to a colleague during a meeting.
Bank Shares

Here are the latest growth forecasts for the CBA share price

Can the bank continue rising? Here are some expert views.

Read more »

A businessman presents a company annual report in front of a group seated at a table
Bank Shares

Earnings season predictions: Macquarie weighs in on the big 4 banks

What are the broker's predictions?

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Major CBA investor reveals why he's all in

This investor described one major reason driving his investment in CBA shares.

Read more »

Young investor sits at desk looking happy after discovering Westpac's dividend reinvestment plan
Bank Shares

Invested $10,000 in Westpac shares 2 years ago? Guess how much you've already banked!

Atop their regular dividend payments, Westpac shares have enjoyed a strong two-year run.

Read more »

Woman calculating dividends on calculator and working on a laptop.
Bank Shares

Buying CBA stock today? Here's the dividend yield you'll get

CBA's yield right now might surprise you.

Read more »